oversight

Closure of the Audit of the Association of Universities for Research in Astronomy, Inc.'s Indirect Cost Rate Structure

Published by the National Science Foundation, Office of Inspector General on 2017-09-13.

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

Closure of the Audit of the
Association of Universities for
Research in Astronomy, Inc.’s
Indirect Cost Rate Structure




September 13, 2017
OIG 17-6-001
AT A GLANCE
Closure of the Audit of the Association of Universities for Research
in Astronomy, Inc.’s Indirect Cost Rate Structure
Report No. 17-6-001
September 13, 2017

    WHY WE DID THIS AUDIT
    We initiated this audit in response to a request from the Director of NSF and because past OIG reports
    identified weaknesses in the Association of Universities for Research in Astronomy, Inc.’s (AURA)
    accounting and cost estimating systems. Our objectives were to determine if AURA’s indirect cost
    structure resulted in an equitable distribution of indirect expenses, complied with applicable Federal
    regulations, and was appropriate for the organization.

    WHAT WE FOUND
    We closed this audit after we learned that AURA is undergoing a reorganization that will result in a
    significant change to its indirect cost structure. We did not assess the proposed indirect cost model
    because it is in the planning stages and could change. We will monitor the progress of the
    reorganization to identify any risk areas for a future audit.

    WHAT WE RECOMMEND
    There are no recommendations in this report.

    AWARDEE RESPONSE
    As there are no recommendations in the report, there is no response from the awardee. However, a
    copy of the report was shared with AURA and its feedback was taken into consideration.

    CONTACT US
    For further information, contact us at (703) 292-7100 or oig@nsf.gov.




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MEMORANDUM

DATE:                 September 13, 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:              Final Report No. 17-6-001, Closure of the Audit of the Association of Universities
                      for Research in Astronomy, Inc.’s Indirect Cost Rate Structure

We closed this audit because AURA is undergoing a reorganization that will significantly change its
indirect cost structure. We confirmed that AURA accurately applied the correct indirect cost rates with
one exception. We will monitor the progress of the reorganization to assess and identify any risk areas
that may be considered for a future audit. There are no recommendations in this report.

We appreciate the courtesies and assistance NSF and AURA staff provided during the audit. If you have
questions, please contact Ken Lish, Supervisory Audit Manager, at (703) 292-7100.

cc:            Rochelle Ray          Carrie Davison         John Anderson
               Christina Sarris      Charlie Ziegler        Vernon Pankonin
               Bill Kinser           Allison Lerner         Susan Carnohan
               Ken Chason            Dan Buchtel            Ken Lish
               Holly Snow            Darrell Drake          Jae Kim
               Jeremy Hall           Louise Nelson          Karen Scott




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Background
The Association of Universities for Research in Astronomy, Inc. (AURA) is a consortium of 44 U.S.
institutions and 5 international affiliates that operates astronomical observatories. AURA’s mission is
“to promote excellence in astronomical research by providing access to information about the universe
from state-of-the-art facilities, surveys, and archives.” AURA oversees the following NSF-funded
astronomical centers (Centers):

    •    Gemini Observatory (Gemini)
    •    Large Synoptic Survey Telescope (LSST)
    •    National Optical Astronomical Observatory (NOAO)
    •    National Solar Observatory (NSO)

AURA’s Corporate Office provides management and administrative oversight to the Centers. AURA’s
Central Administrative Services (CAS) and Human Resources (HR) offices provide business services
for each Center. Gemini, NOAO, and LSST have operations in the United States and Chile.

AURA recovers all costs, including direct and indirect costs for the Centers and for Corporate, CAS, and
HR supporting functions, in the United States and Chile. Direct costs include labor, benefits, materials,
and travel. Indirect costs support more than one operation or project, including facility costs like
building repairs and utilities and administrative costs like accounting and procurement services and
human resources.

AURA prepares indirect cost rates annually, distributing the costs into rate pools based on the portion of
facility and administrative (F&A) costs each Center incurred in the prior year. For example, Centers that
occupy NOAO buildings share in the cost for NOAO’s facilities.

AURA submits an indirect cost proposal to NSF’s Cost Analysis and Pre-Award Branch for review and
approval each year. NSF’s approval of AURA’s proposed indirect cost rates (provisional rates)
temporarily allows funding and reimbursement of indirect costs before AURA and NSF can determine
actual rates (final rates) using cost data at the end of AURA’s accounting period.


Results of Audit
We closed our audit of AURA’s indirect cost rate structure because AURA is undergoing a
reorganization that will materially change the structure. We did confirm that AURA accurately applied
the correct indirect cost rates under its current structure with one exception. We will monitor the
progress of the reorganization to assess and identify any risk areas that we may consider for a future
audit.




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AURA’s Reorganization Will Materially Change the Indirect Cost Rate Structure

AURA is working with NSF to implement an organizational structure that takes advantage of economies
of scale to improve scientific output, and meets the needs of the scientific community and the Federal
government.



AURA officials told us that the reorganization would have a material impact on AURA’s indirect cost
structure. As of April 2017, AURA’s indirect cost structure was composed of 28 indirect cost rates. In
addition to Corporate, CAS, and HR rates, each Center also has its own indirect cost rate and fringe
benefit rate. Some Centers also have rates for facility use. AURA personnel said they designed the
structure to allocate indirect costs in the most accurate way possible, but recognized that the structure is
complicated. Along with the reorganization,
                                                       AURA’s goal is to reduce the number of rates to as
few as possible, while still ensuring fair and accurate allocation of indirect costs. Once it has been
finalized and approved by NSF, AURA’s indirect cost structure will likely be composed of


Table 1. Composition of AURA’s Indirect Cost Rate Structure
         Rate Type           Composition of Rates      Possible Composition of Rates
                                 Under Current            Under Proposed NCOA
                           Organizational Structure      Organizational Structure




Source: NSF OIG




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With One Exception, AURA Applied Indirect Cost Rates Accurately

We tested AURA’s application of its indirect cost rates for fiscal years 2015, 2016, and 2017. AURA
accurately applied the correct rates with one exception. In FY 2015, AURA applied a rate that had not
yet received final NSF approval for a particular set of costs rather than the approved provisional rate for
those costs. NSF’s Cost Analysis and Pre-Award Branch is aware of this exception and is working with
AURA to resolve this issue.

Conclusion
We closed this audit because AURA is undergoing a reorganization that will have a material impact on
the organization’s indirect cost structure. Any recommendations related to an indirect cost structure that
will be substantially different in the immediate future would be ineffective. Additionally, we did not
evaluate the indirect cost structure proposed under the         model because it is still in the planning
stages and may change. We did ensure that AURA accurately applied the indirect cost rates under its
current structure, and we will monitor the progress of the reorganization to assess and identify any risk
areas for a future audit.

Objectives, Scope, and Methodology
The objectives of the audit were to determine if AURA’s indirect cost structure resulted in an equitable
distribution of indirect expenses, complied with applicable Federal regulations, and was appropriate for
the organization. We also conducted test work to ensure that AURA applied indirect rates appropriately.
The audit stemmed from both a request from the Director of NSF and a series of past OIG reports that
identified weaknesses in AURA’s accounting and cost estimating systems.

To accomplish our objectives, we reviewed all applicable documentation related to AURA’s indirect
cost structure, interviewed staff from both AURA and NSF, and conducted test work to determine if
AURA applied the indirect cost rates appropriately.

We are issuing this routine activity to report the closure of this performance audit of AURA’s indirect
cost rate structure.

We conducted this audit from February 2017 to September 2017, when the audit was closed.

OIG Staff Acknowledgments
Dan Buchtel, Director, External Audits; Ken Lish, Supervisory Audit Manager; Holly Snow, Audit
Manager; Darrell Drake, Senior Auditor; Jae Kim, Senior Auditor; Jeremy Hall, Management Analyst;
and Kelly Stefanko, Independent Report Referencer, made key contributions to this report.




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