oversight

Performance Audit of Incurred Costs - Georgia Tech Research Corporation

Published by the National Science Foundation, Office of Inspector General on 2017-09-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Performance Audit of Incurred Costs –
Georgia Tech Research Corporation
REPORT PREPARED BY WITHUMSMITH+BROWN




September 28, 2017
OIG 17-1-008
NSF 	 NATIONAL SCIENCE FOUNDATION
        OFFICE OF INSPECTOR GENERAL


 AT A GLANCE
 Performance Audit of Incurred Costs - Georgia Tech Research Corporation
 Report No. OIG 17-1-008
 September 28, 2017

  AUDIT OBJECTIVE
  The National Science Foundation Office of Inspector General engaged WithumSmith+Brown (WSB)
  to conduct a perfonnance audit of incmTed costs at Georgia Tech Research Cmporation (Georgia
  Tech) for the period April 1, 2012, to March 31, 201 5. The audit encompassed more than $201 million
  comprising all costs claimed to NSF. The objective of the audit was to detennine if costs claimed by
  Georgia Tech dming this period were allocable, allowable, reasonable, and in confo1mity with NSF
  and Federal financial assistan ce requirements. WSB is responsible for the atta.ched auditor's repo1t and
  the conclusions expressed in this repo1t. NSF OIG does not express any opinion on the conclusions
  presented in WSB's audit repo1t.

  AUDIT RESULTS
  Costs Georgia Tech charged to its NSF-sponsored agreements did not always comply with Federal and
  NSF award requirements. The auditors questioned $68,837 of costs claimed by Georgia Tech dming
  th e audit period. Specifically, the auditors found $62,009 in pm-chases of equipment neai· the end of the
  award that did not appear to benefit the NSF awai·d charged and $6,828 in travel and relocation costs
  that did not appear reasonable an d necessaiy for the awards charged or were not in complian ce with
  NSF requirements.

  RECOMMENDATIONS
  The auditors included two findings in the report with associated recommendations for NSF to resolve
  the questioned costs and to ensm e Georgia Tech strengthens its administrative and management
  controls.

  AUDITEE RESPONSE
  Georgia Tech agreed to remove direct and associated indirect costs for one questioned transaction from
  an NSF award because it did not provide sufficient suppo1ting documentation. Georgia Tech disagreed
  with the remaining findings in the report. It contends that some of the costs within the fin dings ai·e
  allowable and disagreed with the auditors' interpretation of the Federal guidance. Georgia Tech also
  believes it has adequate management an d administrative controls. After taking Georgia Tech's
  comments into consideration, the auditors continue to question the costs and left the findings
  unchanged. Georgia Tech's response is attached in its entirety to the repo1t as Appendix A.

  FOR FURTHER INFORMATION, CONTACT US AT (703) 292-7100 OR OIG@NSF.GOV.
NSF 	 NATIONAL SCIENCE FOUNDATION
         OFFICE OF INSPECTOR GENERAL


 MEMORANDUM

 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 


 DATE: 	        September28, 2017

 SUBJECT: 	 Audit Report No. 17-1-008, Georgia Tech Research Corporation

 This memo transmits the WithumSmith+Brown (WSB) report for the audit of costs totaling
 approximately $201 million charged by the Georgia Tech Research Corporation (Georgia Tech) 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 Georgia Tech during this
 period were allocable, allowable, reasonable, and in conformity with NSF and 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 monitoring responsibilities, 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 of the audit at key points;
    •	  coordinated periodic meetings with WSB, 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 Billy McCain at 703-292-7100.

Attachment

cc:
John Anderson              Fae Korsmo                  Carrie Davison              Ken Lish
John Veysey                Teresa Grancorvitz          Allison Lerner              Billy McCain
Ann Bushmiller             Pamela Hawkins              Ken Chason                  Jeremy Hall
Christina Sarris           Alex Wynnyk                 Susan Carnohan
Joan Ferrini-Mundy         Rochelle Ray                Dan Buchtel
Georgia Tech Research Corporation

           Audit of Incurred Costs




      National Science Foundation

       Office of Inspector General



           September 25, 2017


               OIG 17-1-008

Table of Contents

Background ...................................................................................................................................................1

Results of Audit ............................................................................................................................................2

  Finding 1: Questionable Transactions Near the End of the Award Period ...............................................2

    Recommendations.................................................................................................................................5

    Summary of Awardee Response...........................................................................................................5

    Auditors’ Additional Comments...........................................................................................................6

  Finding 2: Unallowable Travel and Relocation Costs ..............................................................................7

    Recommendations.................................................................................................................................8

    Summary of Awardee Response...........................................................................................................8

    Auditors’ Additional Comments...........................................................................................................9

Appendix A: Awardee Response ................................................................................................................10

Appendix B: Objective, Scope, Methodology, and Criteria .......................................................................15

  Objective .................................................................................................................................................15

  Scope.......................................................................................................................................................15

  Methodology ...........................................................................................................................................15

  Criteria ....................................................................................................................................................16

Appendix C: Questioned Costs Summary by Award..................................................................................17


Abbreviations

AAG                     Award and Administration Guide
CFR                     Code of Federal Regulations
GTRC                    Georgia Tech Research Corporation
NSF                     National Science Foundation
OIG                     Office of Inspector General
PI                      Principal Investigator
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                                                                                                                             AUDIT TAX ADVISORY



            Background 


            The National Science Foundation (NSF) is an independent Federal agency created 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 contrncts to educational and research institutions in all pa1ts of the United
            States.

            NSF grantees must follow Federal and NSF grant regulations and guidance in administering its
            NSF awards. The Georgia Tech Research Corporation (GTRC) is a Georgia not-for-profit
            c01poration that works on behalf of all academic departments and se1ves as the contracting agency
            for sponsored research projects perfonned by the Georgia hlstitute of Technology. GTRC is an
            NSF grant recipient that received more than $300 million of Federal awards in fiscal year 2015.
            As illustrated in Figure 1, between April 1, 2012, and March 31 , 2015, GTRC claimed more than
            $201 million of costs across 1,072 NSF awards. An analysis of these costs claimed by budget
            category, based on the accounting data provided by GTRC, is po1trayed in Figure 1.

            Figure 1. Costs Claimed by NSF Budget Category, April 1, 2012 to March 31, 2015

                                                                                              Fringe Benefits,
                      Travel,
                                                                                              $9,348,210. 5%
                  $7,614,767 . 4%




                                                                           Other, $22,269 • 0%

                                    • Equipment                 • Fringe Benefits          • Indirect Costs
                                    • Materials and Supplies • Other                       • Salaries and Wages
                                    • Subcontracts              · Travel                   • Tuition Remission

            Source: Auditor analysis of accounting data provided by GTRC




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WithumSmith+Brown, PC Tm Logan Square, Suite 2001, 18th and Arch Streets, Philadelphia, Pennsylvania 19103-2726 T(215) 546 2140 F1215) 546 2148 withum.com 

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Results of Audit 


WithumSmith+Brown, under contrnct with the NSF-OIG, audited the costs claimed by GTRC on
NSF awards for the period beginning April 1, 2012, and ending March 31, 2015. In our testing of
250 judgmentally selected transactions, we identified 10 transactions with a total $68,837 of
questioned costs charged to 9 NSF awards. The questioned costs related to 1) transactions near the
end of the award period; and 2) travel and relocation costs. A schedule of questioned costs by
award is included in Appendix C.

Finding 1: Questionable Transactions Near the End of the Award Period

We found GTRC made purchases near the end of award periods for items that did not appear
necessary or properly allocable to the awards charged.

Equipment, M aterials, and S upplies Purchases Do N ot Appear to Benefit the Award

We identified six ti·ansactions totaling $62,009 where the purchase of equipment near the end of
the award did not appear to benefit the NSF award charged. These questioned transactions are
described in Table 1.

Table 1. Description of Questioned Transactions Purchased Near Award Expiration

                                                                                                            #
                                                                                               #          Days
                                  NSF                                     $          O/o     Days in     Left in
                                 Award                  Total           Charged    Charged   Award       (After)
       Description               Number                 Cost            to NSF      to NSF   Period      Award
     Computer Hardware                          '   I   •   ~   :          t tit               t.

 2 Computing                                            82,721             8,066     10%                   17
   E ui ment
 3 Apple MacBook Pro                                        2,458          2,458    100%      1,095        93
 4   Graphics Card                                          1,503          1,503    100%      2,190        37
 5 DVD Set, Dust                                            1,262          1,262    100%      1,460        13
   Buster, Digital
   Camera, Other
   Electronics
 6 Laser                                                28,720            28,720    100%      1,080        71
 Total                                                                   $62,009
Source: Auditor analysis ofquestioned transactions




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We questioned the $33,289 below on five multi-year awards for various types of electronics
purchased near the award expiration. These purchases were not reasonable or necessaiy
considering the limited time remaining on the awai·ds. Additionally, several of the purchases were
charged 100 percent to the NSF award, when the award received little, if any, benefit. Other items
purchased were general-pmpose computer equipment, which GTRC could not demonstrate was
used primarily or exclusively on the NSF award, and are therefore not allowable. 1 In other cases,
where the equipment was allocated to more than one award or project, the allocation methodology
used by GTRC was not adequately documented.2

These five questioned transactions include:
   • 	 $20,000 for the purchase of computer hardware. Computer hardware totaling $64,855 was
       purchased on October 12, 2012, and charged to a non-NSF project. On March 15, 2013,
       $20,000 of the cost of the computer hai·dwai·e was transfeITed to NSF award-              that
       expired Febmaiy 28, 2013. The pmpose of this award was to acquire ~cture
       equipment to create a testbed for energy efficient IT to be used in ftnther research. After
       the expiration ofNSF award-            , GTRC's School of Computer Science finance office
       sent an email to the Principal Investigator (Pl) st.atin   that $20,000 of the purchase of
       computer hardware would be transferred to award                . In response to our inquiries,
       GTRC stated that the equipment purchase was to upgra e the computer infrastructure
       within the College of Computing, which suppo1ts the testbed center and the intention of
       this awai·d. GTRC also stated that the decision to transfer $20,000 to this awai·d was based
       on the estimation that one-third of the rack space was related to this awai·d. The PI, the
       School of Computer Science, the College of Computing, and the Office of Grants and
       Contracts all agreed that the ainount charged was appropriate. GTRC did not provide any
       documentation to suppo1t this allocation methodology.
   • 	 $8,066 for computing equipment that was received on Januaiy 14, 2014, on a 7-yeai· awai·d
       that expired January 31, 2014. The computing equipment was available for less than 1
       percent of the grant life (17 out of2,555 days). Approximately 10 percent of the purchase
       price of the computing equipment was allocated to this awai·d. According to GTRC, this
       was a very data intensive awai·d and this purchase was made at the end of the award for
       storage and ai·chival pmposes as required by the award. GTRC stated the allocation was
       based on the actual usage of the equipment, but GTRC did not provide any documentation
       to suppo1t the allocation of 10 percent to this awai·d, which did not have any equipment in
       the approved budget.
   • 	 $2,458 for an Apple MacBookPro that was purchased on April 29, 2013, on a3-yeai· awai·d
       that expired July 31, 2013. This computer appeai·s to be general pmpose computer
       equipment and was only available for 9 percent of the award life (93 out of 1,095 days).
       GTRC could not provide evidence that this laptop was used primarily or exclusively on
       this NSF award.

1 AAG Chapter V, B.2.d. states that " [e]xpenditures for general purpose equipment are normally unallowable unless

the equipment is primarily or exclusively used in the actual conduct ofresearch."
2 2 CFR 220, Appendix A, Section A2.e. states that "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."

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       • 	 $1 ,503 for a graphics card purchased on July 25, 2013, on a 6-year award that expired on
           August 31, 2013. The graphics card was available for less than 2 percent of the award life
           (37 out of 2,190 days). GTRC was unable to provide an explanation of how this purchase
           was necessary for and used exclusively on this award.
       • 	 $1 ,262 for a DVD set, dust buster, digital camera, and other electronics purchased on
           August 18, 2014, on a 4-year award that expired on August 31, 2014. These items were
           available for less than 1 percent of the award life (13 out of 1,460 days). GTRC could not
           provide evidence that these items were used primarily or exclusively on this NSF award.

It should be noted that in November 2013, NSF added guidance to the Award and Administration
Guide (AAG) that states that a grantee should not purchase items of equipment in anticipation of
the expiration of an award where there is little or no time left to be utilized in the actual conduct
of research.3 Although this guidance was not in effect for the awards we are questioning, this
addition to the AAG is consistent with cost principles for reasonableness and allocability, in which
all costs must be fully allocable to the award that they are charged and incuned solely to advance
the work under that award.

Additionally, we questioned $28,720 for the purchase of a laser received on June 21, 2013, on a
3-year award that expired on August 31, 2013. GTRC spent 7 percent of the cumulative award
budget on this laser that was only available for 2.5 months of the grant life (71 out of 1,080 days).
Fmthennore, the purchase of this laser was not included in the award budget. Per GTRC, this laser
was the upgraded version of the previous one used by their lab that broke and was unrepairable.
The entire cost of the laser was charged to NSF award -                 · GTRC stated that a major
contributor to the decision to purchase the laser is that a continuation of this research was awarded
under NSF a w a r d -, and that this was an unforeseen expense at the time of the proposal.
GTRC also indicated that the rebudgeting of the awarded funds to purchase this equipment was
reviewed by both the Office of Sponsored Programs and The Office of Grants and Contracts
Accounting, and both offices agreed that the budgeting of funds to purchase this equipment was
both allowable and reasonable. Documentation to suppo1t these approvals was not provided during
the audit.

NSF guidance requires grantees to assure that each purchase of equipment is necessaiy for the
research or activity suppo1ted by the grant. 4 We therefore question whether it was reasonable to
charge 100 percent of the cost of this laser to an award that was expiring and could only provide
little, if any, benefit to this awai·d.




3   AAG Chapter V, Section A.2.c, November 2013 (NSF 14-1)
4
    AAG Chapter IV, Section E.2.a.(i), January 2010 (NSF 10-1)

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We are questioning costs associated with these equipment expenses as shown in Table 2:

    Table 2. Summary of Questioned Transactions Purchased Near Award Expiration

                                                                Questioned Costs
                 NSF Award No.             FY            Direct    Indirecf      Total
             I
             I
             I
             I
             I
                                        2012-2013
                                        2013-2014
                                        2012-2013
                                        2013-2014
                                        2014-2015
                                                         $ 20,000
                                                            8,066
                                                            1 628
                                                            1,000
                                                              836
                                                                          830
                                                                          503
                                                                          426
                                                                              llBmD
                                                                                    -
                                                                                   1,503
                                                                                   1,262
                                                                                           mB

             I                          2012-2013          28,720                 28,720
                   I   •   I   estioned Costs            $ 60,250     $ 1,759   $ 62,009
                 •We calculated indirect costs by multiplying the questioned direct costs by the
                 actual indirect cost rate applied to the incwred cost per GTRC's general ledger.
                 Source: Auditor analysis ofquestioned transactions

Recommendations

We recommend that the NSF 's Director of the Division of Institution and Award Suppo1t address
and resolve the following GTRC recommendations:

   1. 	 Resolve the $62,009 of questioned costs.
   2. 	 Strengthen the administrative and management controls and processes over expenditures
        near the end of an award and allocation of equipment.

Summary ofAwardee Response

GTRC does not agree with the questioned costs totaling $62,009 for the transactions near award
expiration as follows:

Transaction 1 ($20,000)
GTRC stated this purchase was critical for meeting the objectives of the award and that the costs
claimed were within the approved budget for the cost category. The PI, who has primaiy
responsibility to manage the awai·d funds, in collaboration with GTRC IT professionals,
detennined that the allocation was proper and allowable. The cost transfer was reviewed and
approved by the department and the Office of Grants and Contracts Accounting in accordance with
Institute policy, and therefore GTRC concluded that the allocation was appropriate and disagreed
with the questioned cost.

Transaction 2 ($8,066)
GTRC stated this purchase was needed to complete the analysis for the reseai·ch and for storage of
the data required by NSF . The allocation of 10% of the purchase was based on the PI's usage and
research needs with guidance from the Institute 's IT professionals. The PI has primaiy
responsibility for the management of the awai·d funds, and the institution's documentation

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requirements for the actions of the PI are sufficient. GTRC concluded that the PI's allocation was 

appropriate and disagreed with the questioned costs. 


Transactions 3. 4. and 5 ($1.628. $1,000. $836) 

GTRC stated these purchases followed Institute policies and procedures including appropriate 

approvals, and disagreed with these findings. 


Transaction 6 ($28.720) 

GTRC stated this purchase was an essential component and was made to replace an unrepairable 

laser. The PI worked with the Office of Sponsored Programs and the Office of Grants and 

Contracts Accounting to use remaining project funds to purchase this equipment under rebudgeting 

authority. Institution representatives agreed that the expense was allowable, allocable and 

reasonable. GTRC concluded that the purchase of this equipment was allocable and allowable and 

benefited the award, and was in accordance with OMB guidance and FDP expanded authority. 

GTRC disagrees with the questioned costs. 


See Appendix A for the complete GTRC response. 


Auditors' Additional Comments

Transaction 1 ($20.000) 

Our conclusion remains unchanged. GTRC did not provide any additional documentation to 

support the allocation of approximately one-third of this purchase cost to the award, as required 

by Federal financial assistance requirements. Therefore, the repo1t findings and recommendations 

remain as stated. 


Transaction 2 ($8,066) 

Our conclusion remains unchanged. GTRC did not provide any additional documentation to 

support the allocation of 10 percent of this purchase cost to the award, as required by Federal 

financial assistance requirements. Therefore, the repo1t findings and recommendations remain as 

stated. 


Transactions 3. 4. and 5 ($1.628. $1,000. $836) 

For the three transactions for computer equipment, electronics, and supplies purchases that GTRC 

disagreed with, our conclusions remain unchanged. The additional infonnation provided by GTRC 

did not change our view that these purchases near various award expiration dates should be 

questioned. Therefore, the repo1t findings and recommendations remain as stated. 


Transaction 6 ($28.720) 

Our conclusion remains unchanged. The additional info1mation provided by GTRC did not change 

our view that this purchase near the award expiration date should be questioned. Therefore, the 

report findings and recommendations remain as stated. 





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Finding 2: Unallowable Travel and Relocation Costs

We identified several trnvel and relocation costs that did not appear reasonable and necessaiy for
the awai·ds charged or were not in compliance with NSF requirements.

Travel Was Not Reasonable and Necessary

We questioned three transactions totaling $4,666 chai·ged to a w a r d - for a trip taken by the
PI. The award was made to suppo1i two lecturers and six students attending a summer school in
Italy. NSF made this $20,000 award to cover the travel for the eight paiticipants with the
understanding that the PI 's travel costs would be covered by non-Federal funds.

According to the proposal, the PI's travel was supposed to be covered by non-Federal funds.
However, because the third pa1ty funding was not obtained, the PI used NSF award funds to cover
II  travel costs. The PI's travel costs included travel to -             Italy. According to the
travel ex ense re ort, the PI "will travel t o - It~op. And then will stay in
                       to work with reseai·ch collaborators."

Although the school session took place in June 2012, the grant was not actually awai·ded until
Januaiy 6, 2013. Amendment I to the awai·d, dated April 2, 2013, pennitted GTRC to incur
$14,709 of pre-award costs more than 90 days prior to the award date. However, even though
GTRC 's proposal excluded the PI's travel costs, GTRC then included the PI's travel costs with the
$14,709 approved by NSF. NSF was not notified that the requested amount also included the PI's
travel costs.

We ai·e questioning whether it was reasonable to use 25 percent of the award budget to suppo1i the
PI's travel when the budget justification in the approved budget clearly stated the PI's travel costs
would come from non-Federal funds. Based on the documentation provided for audit, we are also
questioning the relevancy and necessity ofthe PI's travel t o - o n an award that was supposed
to suppo1i only the travel of eight other individuals to attend a school in Italy. GTRC stated that
the PI properly managed the funding and actually spent less than the awai·d amount; these expenses
went through GTRC 's internal approval process; and the PI ultimately completed what NSF asked
him to do in a sho1i time frame.

Relocation Costs Did Not Comply with NSF Requirements

We questioned one transaction totaling $2,162 chai·ged to awai·d -         for reimbursement of
an employee's moving and relocation expenses to work on the awai·d 6 months prior to the awai·d
expiration date. The reimbursement was for a flight on August 30, 2012, and the award expired on
Febrnai·y 28, 2013. The proposal did not mention that GTRC planned to hire this individual for
full-time work on this award.

In order to charge relocation costs directly to an NSF award, NSF requires that a proposal for NSF
support specifically indicate, among other things, that the grantee intends to hire a nained

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individual for full-time work on the project, and that the individual is essential to the project on a
full-time basis for a continuous period of at least 12 months.5 These two conditions were not met
in this instance. As a result of the unreasonable travel and unallowable relocation costs, we are
questioning a total of $6,828 as shown in Table 3:

                  Table 3. Summary of Questioned Travel and Relocation Costs




                                                                               730
                                             s
                  ·we calculated indirect costs by multiplying the questioned direct costs by the
                  actual indirect cost rate applied to the incwred cost per GTRC's general ledger.
                  Source: Auditor analysis ofquestioned transactions

Recommendations

We recommend that the NSF 's Director of the Division of Institution and Award Support address
and resolve the following GTRC recommendations:

      1. 	 Resolve the $6,828 of questioned costs.
      2. 	 Sti-engthen the administrntive and management controls and processes over trnvel and
           relocation costs.

Summary ofAwardee Response

GTRC does not agree with the $6,828 of questioned travel and relocation costs as follows:

Transactions 1. 2. and 3 ($4,666)
GTRC disagreed with these questioned costs. When the non-Federal funding did not materialize,
the PI was left to manage the NSF budcret to cover trnvel costs and meet the obligations of the
award. The collaboration with the                                          from an institution in
-       was noted in the final repo1i submitted to NSF, and that the PI worked closely with the
paiiners on all aspects of the workshop both before and after the workshop. GTRC also stated the
authorization to incm pre-award costs began on June 16, 2012, which was the date the PI dei1ied
for •      . The PI did not communicate with the NSF Program officer at the time because      did
not believe it was necessai·y as l lwas working within the scope of the awai·d and the approved
budget.

Transaction 4 ($1,432)
GTRC contends this transaction was processed within the policies and procedm es of the Institution
and is allowable, allocable, and reasonable. However, GTRC stated that since the documentation

5   NSF AAG Chapter V.C.4 Relocation Costs

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provided was deemed insufficient, it will take appropriate steps to remove these costs and
associated F &A from the award.

See Appendix A for the complete GTRC response.

Auditors' Additional Comments

Transactions l, 2. and 3 ($4.666) 

For the transactions totaling $4,666 that GTRC disagreed with, om conclusions remain unchanged. 

The additional info1mation provided by GTRC did not change our view that using a significant 

percentage of award funds for expenses NSF did not agree to in the budget was not reasonable 

under the circumstances. We believe that NSF should have been made aware of the lack of non­

federal funding to support this award, especially since the event occuned prior to the effective date 

of the award, as that may have impacted NSF 's funding decision. Therefore, the repo1t findings 

and recommendations remain as stated. 


Transaction 4 ($1.432) 

GTRC 's comment related to this transaction is responsive to this portion ofthe finding. Once NSF 

dete1mines that the $2,162 ($1,432 direct costs plus $730 F&A costs) has been returned, this issue 

related to the relocation costs should be closed. 





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Appendix A: Awardee Response 





   Geqrgia ~ ~
         Tech ~.~



             September 20, 2017


             Mr. Eric Strauss, Partner 

             WithumSmith-t-Brown 

             Two Logan Square
             Eighteenth and Arch Streets
             Suite 2001
             Philadelphia, PA 19103


             Dear Mr. Strauss,

             The Georgia Tech Research Corporation is in receipt of the National Science Foundation
             Office of lnspector General (NSF-OIG) draft audit report OIG-17-3-00X dated September 1,
             2017. This audit of incurred costs covers the period April 1, 2012 through March 31, 2015
             and included more than $201 million in claimed costs. We would like to thank the
             WithumSmith+Brown audit team for engaging in this audit in a collaborative and
             professional manner. In addition, we appreciate the opportunity to demonstrate Georgia
             Tech's internal controls and management systems in the administration of NSF and all
             Federal sponsored awards. We trust that the cost, benefit, and value of this audit and
             similar audits will be objectively measured and will lead to further reliance on the Federal
             Single Audit going forward.

             The audit report identifies 10 transactions totaling $68,837 in direct and indirect costs
             relating to 1) transactions near the end of the award period; and 2) travel and relocation
             costs. We believe that all transactions were processed within the policies and procedures of
             our institution and are allowable, allocable, and reasonable. Our responses to the individual
             questionable transactions are below:




          Ceorgia Tech Research Corporation
          nn nffilinted orguniz;ition nf
          ~orgia Institute of Technology
          Atlon~•, Georgi• 30332-0415 U.S.A.
          PHONE 404.894.4819 fAX 404.894.7002
          www.gtrc.gatech.edu

          A Unil <ftht u,,icltrSity S~tnJ1 o/C.rorgM   I Au Cqml l,rlwcnflouand F.m1JkiynteJt Opportemity l1rstituJion




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Appendix A: Awardee Response 




            Finding 1: Questionable Transactions Near the End of the Award Period (6 transactions)

            Transaction #1: The transaction in question is a $20,000 allocation of computer hardware
            costs totaling $64,855. The cost was transferred to the award shortly after the period of
            performance had ended but the purchase was made and the equipment used within the
            award period, providing benefit to the award. The purpose of the award, as referenced in
            the audit finding, "was to acquire infrastructure equipment to create a testbed for energy
            efficient IT, to be used in further research", and as a result the purchase of the computer
            hardware was critical to successfully meeting the objectives of the award. The total
            equipmentcosts claimed were within the approved budget for the cost category.

            The email noted in the finding documents and summarizes the allocation decision made by
            the principal investigator (PI), as the person with first-hand knowledge of the activities and
            benefit to the award. OMB Circular A-21, Cost Principles for Educational Institutions, in
            effect at the time of this award, states in Section C4d, Allocation and Documentation
            Standard, "if a cost benefits two or more projects or activities in proportions that can be
            determined without undue effort or cost, the cost should be allocated to the projects based
            on the proportional benefit. If a cost benefits two or more projects or activities in
            proportions that cannot be determined because of the interrelationship of the work
            involved, then, notwithstanding subsection C4b, the costs may be allocated or transferred to
            benefited projects on any reasonable basis, consistent with subsections C4d(1) and C4d(2)" .
            Further, Section C4d allows for institutions to authorize the "Pl or other individual to have
            primary responsibility, given the requirements of subsection C4d(2), for the management of
            sponsored agreement funds, then the institution's documentation requirements for the
            actions of those individuals will normally be considered sufficient" . The Pl, in collaboration
            with Institute IT professionals, made the determination that 1/3 of the cost was allocable
            and allowable to this NSF award based on the infrastructure footprint of the rack space used
            for the hardware, and communicated such to his financial support team, as documented by
            the email provided. The cost transfer was reviewed and approved both in the department
            and the Office of Grants and Contracts Accounting in central financial administration as
            allowable based on Institute policy. We believe the allocation was appropriate for this
            purchase and disagree with the questioned cost.




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Appendix A: Awardee Response 




            Transaction #2: The transaction in question in the amount of $8,066 was an allocation for
            the purchase of computer hardware. The hardware, purchased in combination with other
            hardware to take advantage of pricing benefits, was used for computing capability and
            storage for this data intensive research project. The expanded storage and
            computing capability was needed to complete analysis of the research data for the final NSF
            report and publications for this research, as well as the storage of data as required by NSF.
            The audit report questions the allocation methodology stating, "GTRC did not provide any
            documentation to support the allocation of 10 percent to this award ..." As previously stated
            to the auditors, the allocation was 10% of the overall purchase and was based on the PJ's
            usage and research needs with guidance from the Institute' s IT professionals.

            OMB Circular A-21, Cost Principles for Educational Institutions, Section C4d, allows for
            institutions to authorize the "PI or other individual to have primary responsibility, given the
            requirements of subsection C4d(2), for the management of sponsored agreement funds, then
            the institution's documentation requirements for the actions of those individuals will
            normally be considered sufficient". The PL w ith the assistance of other institutional experts,
            made the determination that the purchase of this computer hardware was allocable and
            allowable to this NSF award and was of benefit the award to complete data analysis and
            data storage needs. We believe the allocation was appropria te for this purchase and
            disagree with the questioned cost.



            Transactions #3, 4 & 5: Georgia Tech disagrees with these findings. While the purchases
            were made late in the award period, Institute policies and procedures were followed
            regarding the procurement of the items, including appropriate approvals.



            Transaction #6: The transaction in question was for a $28,720 purchase of replacement laser
            equipment required to provide results for the final report under this award. This purchase
            was initiated within the last 6 months of the award to replace the previous laser which had
            broken and was determined to be unrepairable. This purchase was an unforeseen expense
            but was an essential component of the research apparatus. Within this last 6 months of the
            award, the PI worked with the Office of Sponsored Programs and the Office of Grants and
            Contracts Accounting to use remaining project funds to purchase this equipment, under




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Appendix A: Awardee Response 





            rebudgeting authority. At the time of purchase, all institutional representatives agreed that
            this expense was allowable, allocable, and reasonable.

            OMB Circular A-21, Cost Principles for Educational Institutions, Section C4d, allows for
            institutions to authorize the "PI or other individual to have primary responsibility, given the
            requirements of subsection C4d(2), for the management of sponsored agreement funds,
            then the institution's documentation requirements for the actions of those individuals will
            normally be considered sufficient". The Pl, with institutional review and approval, made
            the determination that the purchase of this equipment was allocable and allowable to this
            NSF award and was of benefit to the award. This action was also in accordance OMB
            guidance and the FDP expanded authority. We believe the allocation was appropriate for
            this purchase and disagree with the questioned cost.



            Finding 2: Unallowable Travel and Relocation Costs (4 transactions)

            Transactions 1-3: The three travel transactions questioned are related to the same trip taken
            by the Pl under a $20,000 NSF award where the sole purpose of the funding was to conduct
            an ~ Italy, a program held annually- - The proposal was
            submitted to NSF on May 1, 2012 and the workshop took place on June-               2012,
            although the NSF award was not executed until January 2013. We do not dispute that
            additional non-Federal funding was proposed, but when it did not materialize the Pl was
            left to manage the NSF budget to cover.        ave! costs and meet the obligations of the
            award. An amendment to the award was executed on April 2, 2013 authorizing Georgia
            Tech to incur pre-award costs beginning on June.        012, which is the date the PI departed
            for-        rior to the workshop. During the audit field work, we provided explanations
            from the Pl regarding the PI' s collaboration with the
            one of whom is from
            NSF identifies the institute in         s the main organization responsible for the workshop
            and stated that the PI worked closely with the partners on all aspects of the workshop. This
            documents to NSF that the PI collaborated with~fore and after
            the workshop. The PI noted that-       id not communicate with the NSF program officer at
            the time because-     id not believe it would be necessary or required a.        as working
            within the scope of the award and within the approved budget. Based on this information
            provided during the audit field work, we disagree with the questioned costs.




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Appendix A: Awardee Response 




            Transaction 4: Georgia Tech contends that this 2012 transaction was processed within the
            policies and procedures of our institution and is allowable, allocable, and reasonable.
            However, since the documentation provided was deemed insufficient, the Institute will take
            appropriate steps to remove these costs and associated F&A from the award.

            If you have any questions or need additional information, please contact Sandra Mason at
            404-385-7561 or by email at sandra.mason@business.gatech.edu.



            Sincerely,

             /JJ_iLllJJJ_
            kda Diehl Garton
            Vice President for Research and
            General Manager, GTRC & GTARC




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Appendix B: Objective, Scope, Methodology, and Criteria 


Objective

To detennine if costs claimed by GTRC on NSF awards are allowable, allocable, reasonable, and
in compliance with NSF and Federal financial assistance requirements.

Scope
Our audit included assessing the allowability, allocability, and reasonableness of costs claimed by
GTRC through the Award Cash Management $ervice for the 3-year period beginning April 1,
2012, through March 31, 2015. We obtained from GTRC all award transactions comprising all
costs claimed to NSF during this period. This provided an audit universe of more than $201
million, in more than 195,000 transactions, across 1,072 individual NSF awards. For transaction
testing, we judgmentally selected 250 transactions totaling more than $4.5 million and utilized a
data analytics approach to identify potential risk areas.

The audit work was conducted at the auditors ' offices; at NSF in Arlington, Virginia; and onsite
at GTRC in Atlanta, Georgia. Onsite fieldwork was conducted during August 2016.

This peifonnance audit was conducted in accordance with Generally Accepted Government
Auditing Standards. Those standards require that we plan and perfo1m the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for the conclusions based on the
audit objective. The auditors believe that the evidence obtained provides a reasonable basis for the
conclusions based on the audit objective.

Methodology
Our work required reliance on computer-processed data obtained from GTRC and NSF. At our
request, GTRC 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 perfonned automated tests of GTRC 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 GTRC by: 1) comparing costs charged to NSF
award accounts within GTRC's accounting records to repo1ted net expenditures, as reflected in
GTRC's financial repol1s submitted to NSF for the coITesponding periods; 2) perfonning general
ledger to sub-ledger reconciliations ofaccounting data; and 3) reviewing and testing the parameters
GTRC used to extract transaction data from its accounting records and systems.

Based on our testing, we found GTRC 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 ' repo1t on NSF's
financial statements for fiscal years 2014 and 2015 found no repo1table instances in which NSF's
financial management systems did not substantially comply with applicable requirements.

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ill assessing the allowability of costs claimed to NSF by GTRC, we also gained an understanding
of the internal controls applicable to the scope of this audit through interviews with GTRC, review
of policies and procedures, and conducting walkthroughs as applicable.

Criteria
We assessed GTRC's compliance with its internal policies and procedures, as well as the
following:

   • 	 2 CFR Pait 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 Pait 2 15, 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), November 2013 (NSF 14-1);
   • 	 NSF Award Specific Terms and Conditions; and
   • 	 NSF Federal Demonstration Paitnership Teims and Conditions.




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Appendix C: Questioned Costs Summary by Award 





                        0 000
                        8,066                           8,066
                        1,628             830           2,458

                          836             426          1,262
                       28,720                         28,720
                  $    60,250        $   1,759    $   62,009


                  $    4 666         $            $    4666
                       1,432              730          2)62
                  $    6,098         $   730      $    6,828




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