oversight

Performance Audit of Incurred Costs - University of Kansas Center for Research

Published by the National Science Foundation, Office of Inspector General on 2017-10-19.

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

Performance Audit of Incurred Costs –
University of Kansas Center for Research
REPORT PREPARED BY WITHUMSMITH+BROWN, PC




October 19, 2017
OIG 18-1-001
AT A GLANCE
Performance Audit of Incurred Costs – University of Kansas Center for
Research
Report No. OIG 18-1-001
October 19, 2017

AUDIT OBJECTIVE
The National Science Foundation Office of Inspector General engaged WithumSmith+Brown, PC
(WSB) to conduct a performance audit of incurred costs at the University of Kansas Center for
Research (KUCR) for the period October 1, 2011, to September 30, 2014. The audit encompassed
more than $72 million comprising all costs claimed to NSF. The objective of the audit was to
determine if costs claimed by KUCR during this period were allocable, allowable, reasonable, and in
conformity with NSF and Federal financial assistance requirements. WSB is responsible for the
attached auditor’s report and the conclusions expressed in this report. NSF OIG does not express any
opinion on the conclusions presented in WSB’s audit report.

AUDIT RESULTS
Costs KUCR charged to its NSF-sponsored agreements did not always comply with Federal and NSF
award requirements. The auditors questioned $329,049 of costs claimed by KUCR during the audit
period. Specifically, the auditors found $172,030 in unreasonable equipment expenditures; $91,484 in
unreasonable travel; $42,054 in inadequate documentation; $13,047 related to an improper Award
Cash Management $ervice (ACM$) reimbursement request; $8,838 in unreasonable transactions; and
$1,596 for purchases prior to the award effective date without NSF approval.

RECOMMENDATIONS
The auditors included six findings in the report with associated recommendations for NSF to resolve
the questioned costs and to ensure KUCR strengthens administrative and management controls.

AUDITEE RESPONSE
KUCR agreed with the majority of the findings in the report. KUCR also contends that some of the
costs within the findings are allowable and disagreed with the auditors’ conclusions. After taking
KUCR’s comments into consideration, the auditors continue to question the costs and left the findings
unchanged. KUCR’s response is attached in its entirety to the report as Appendix A.

FOR FURTHER INFORMATION, CONTACT US AT (703) 292-7100 OR OIG@NSF.GOV.
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:          October 19, 2017

SUBJECT:       Audit Report No. 18-1-001, University of Kansas Center for Research

This memo transmits the WithumSmith+Brown, PC (WSB) report for the audit of costs totaling
approximately $72 million charged by the University of Kansas Center for Research (KUCR) to its
sponsored agreements with the National Science Foundation (NSF) during the period October 1, 2011,
to September 30, 2014. The objective of the audit was to determine if costs claimed by KUCR during
this period were allocable, allowable, reasonable, and in conformity with NSF and Federal financial
assistance requirements.

Please coordinate with our office during the 6-month resolution period, as specified by Office of
Management and Budget Circular A-50, to develop a mutually agreeable resolution of the audit findings.
Also, the findings should not be closed until NSF determines that all recommendations have been
adequately addressed and the proposed corrective actions have been satisfactorily implemented.

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
University of Kansas Center for
           Research
         Audit of Incurred Costs




    National Science Foundation
     Office of Inspector General


          October 18, 2017

             OIG 18-1-001
Table of Contents
Background ................................................................................................................................................... 1
Results of Audit ............................................................................................................................................ 2
  Finding 1: Unreasonable Equipment......................................................................................................... 2
    Recommendations ................................................................................................................................. 5
    Summary of Awardee Response ........................................................................................................... 5
    Auditors’ Additional Comments ........................................................................................................... 6
  Finding 2: Unreasonable Travel ................................................................................................................ 6
    Recommendations ............................................................................................................................... 13
    Summary of Awardee Response ......................................................................................................... 13
    Auditors’ Additional Comments ......................................................................................................... 15
  Finding 3: Inadequate Documentation and Unallowable Participant Support ........................................ 16
    Recommendations ............................................................................................................................... 18
    Summary of Awardee Response ......................................................................................................... 18
    Auditors’ Additional Comments ......................................................................................................... 18
  Finding 4: Improper ACM$ Request ...................................................................................................... 18
    Recommendations ............................................................................................................................... 19
    Summary of Awardee Response ......................................................................................................... 19
    Auditors’ Additional Comments ......................................................................................................... 19
  Finding 5: Unreasonable or Unallowable Transactions .......................................................................... 19
    Recommendations ............................................................................................................................... 21
    Summary of Awardee Response ......................................................................................................... 21
    Auditors’ Additional Comments ......................................................................................................... 22
  Finding 6: Purchases before Award Effective Date ................................................................................ 22
    Recommendations ............................................................................................................................... 23
    Summary of Awardee Response ......................................................................................................... 23
    Auditors’ Additional Comments ......................................................................................................... 24
  Other Matter: ........................................................................................................................................... 24
    Recommendation ................................................................................................................................ 25
    Summary of Awardee Response ......................................................................................................... 25
    Auditors' Additional Comments ......................................................................................................... 25
Appendix A: Awardee Response ................................................................................................................ 26
Appendix B: Objective, Scope, Methodology and Criteria ........................................................................ 32
  Objective ................................................................................................................................................. 32
  Scope ....................................................................................................................................................... 32
  Methodology ........................................................................................................................................... 32
  Criteria .................................................................................................................................................... 33
Appendix C: Questioned Costs Summary by Award.................................................................................. 34
Abbreviations
AAG      Award and Administration Guide
ACM$     Award Cash Management Service
CFR      Code of Federal Regulations
DIAS     Division of Institution and Award Support
F&A      Facilities and Administrative Costs
GPG      NSF Grant Proposal Guide
KUCR     University of Kansas Center for Research
NSF      National Science Foundation
OIG      Office of Inspector General
PI       Principal Investigator
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 contracts to educational and research institutions in all parts of the United
States.

NSF grantees must follow Federal and NSF grant regulations and guidance in administering NSF
awards. The University of Kansas Center for Research (KUCR) is a not-for-profit research
foundation that helps research investigators by providing research compliance oversight and
managing the financial services. KUCR is an NSF grant recipient that received more than $192
million of Federal awards in fiscal year 2014. As illustrated in Figure 1, between October 1, 2011,
and September 30, 2014, KUCR claimed approximately $72 million of costs across 289 NSF
awards. An analysis of these costs claimed by budget category, based on the accounting data
provided by KUCR, is portrayed in Figure 1.

Figure 1: Costs Claimed by NSF Budget Category, October 1, 2011 to September 30, 2014

                    Materials and supplies                           Consultant services
                    $2.2 million or 3.04%                           $1.0 million or 1.42%


                                                                                             Other
              Travel                                                                 $81 thousand or 0.11%
       $2.7 million or 3.69%
                                                           Salaries and
                                                              wages
                                                          $26.9 million or
    Participant support                                      37.39%
   $3.3 million or 4.54%



         Equipment
    $7.0 million or 9.70%                          Indirect costs
                                                   $13.4 million
                                                     or 18.62%

          Subawards
     $7.6 million or 10.50%
                    Other direct costs
                  $7.9 million or 10.99%

             Salaries and wages              Indirect costs                       Other direct costs
             $26.9 million or 37.39%         $13.4 million or 18.62%              $7.9 million or 10.99%
             Subawards                       Equipment                            Participant support
             $7.6 million or 10.50%          $7.0 million or 9.70%                $3.3 million or 4.54%
             Materials and supplies          Travel                               Consultant services
             $2.2 million or 3.04%           $2.7 million or 3.69%                $1.0 million or 1.42%

Source: Auditor summary of accounting data provided by KUCR



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Results of Audit

WithumSmith+Brown, under contract with NSF OIG, audited the costs claimed by KUCR on NSF
awards for the period beginning October 1, 2011, and ending September 30, 2014. In our testing
of 250 judgmentally selected transactions and 3 non-transaction based tests, we identified 33
transactions with a total $329,049 of questioned costs charged to 19 NSF awards. Six areas where
improved oversight is needed to ensure costs claimed are reasonable and necessary in accordance
with Federal and NSF award requirements include: 1) $172,030 in unreasonable equipment
expenditures; 2) $91,484 in unreasonable travel; 3) $42,054 in inadequate documentation; 4)
$13,047 related to an improper Award Cash Management Service (ACM$) reimbursement request;
5) $8,838 in unreasonable transactions; and 6) $1,596 for purchases prior to the award effective
date without NSF approval. A schedule of questioned costs by award is included in Appendix C.

Finding 1: Unreasonable Equipment
We found KUCR made purchases near the end of award periods for items that did not appear
reasonable or necessary to the awards charged.

Funding Issues

We questioned $135,071 charged to one NSF award for 40 percent of the purchase of a microscope.

During the NSF report acceptance process for the 2nd Annual Report, the NSF Program Officer
went to great lengths to get the report accepted due to the extent of unspent award funds. Per
KUCR, the large amount of unspent money would have an adverse effect on NSF backing levels
by reducing future total funding. Although it was not the normal policy or procedure at KUCR, it
was suggested by the NSF Program Officer that KUCR overspend the equipment budget by
making purchases that would exceed the original project budget. Per the documentation provided,
the method to complete the purchases was not in place, but KUCR decided it should identify
projects lagging in spending and temporarily redistribute funding to the projects that were in need
of equipment.

Per the University, the key of this process was to intentionally over-spend, as a strategy to decrease
the unspent funds. To accomplish the equipment purchase, the Principal Investigator (PI) moved
money between projects.

This individual purchase exceeded the original equipment budget of $55,000 by more than 145
percent. For a cost to be allowable, it must be reasonable. A major consideration for determining
the reasonableness of a cost is whether the individuals concerned acted with due prudence, and the
extent to which the actions taken with respect to incurring the cost are consistent with established




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institutional policies and practices. 1 Making spending decisions based on the possibility of reduced
funding is not reasonable, prudent, or consistent with existing policies. Additionally, KUCR did
not provide any documentation to support the allocation methodology2 for charging 40 percent of
the cost of the microscope to the NSF award, and, therefore, we question the $135,071 charged to
this award for 40 percent of the purchase of this microscope.

Equipment and Materials Purchased at the End of the Award

We identified two transactions, charged to two awards, totaling $34,017 where the purchase of
equipment and materials near the end of the award did not appear to benefit the NSF award charged
as described in Table 3.

Table 3. Description of Questioned Transactions Purchased Near Award Expiration
                                                                                                            Days
                                                          Invoice                           Total         Remaining
    Description                                           Amount           F&A           Questioned       in Award
    Diode Laser Drive and Heads                           $ 29,600        $      --       $ 29,600            48
    Data Loggers and Software Upgrade                         3,067          1,350             4,417          10
    Total                                                 $ 32,667        $ 1,350          $ 34,017
    Source: Auditor analysis of questioned transactions


We questioned the $34,017 on two multi-year awards for various types of electronics purchased
near the award expiration. These purchases were not reasonable or necessary considering the
limited time remaining on the awards. Additionally, in both cases, the purchases were charged 100
percent to the NSF award, when the award received little, if any, benefit. The late purchase date
leads us to believe that the purchases were not necessary, reasonable, or prudent for the
administration of the award. 3

The two questioned items include:

          $29,600 for the purchase of a diode laser drive and laser heads received on June 13, 2011,
           on an award that expired July 31, 2011. The laser was available for 3 percent of the award
           period (48 out of 1,460 days). Per the no-cost extension, submitted July 29, 2010, most of
           the goals of the project had already been reached. With the extension, KUCR was working
1
  According to 2 CFR 220, Appendix A, C.3, a cost may be considered reasonable if the nature of the goods or services
acquired, and the amount involved therefore, reflect the action that a prudent person would have taken under the
circumstances prevailing at the time the decision to incur the cost was made.
2
  2 CFR 220, Appendix A, Section A.2.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.”
3
  2 CFR 220, Appendix A, C.2. and C.3 states that costs “must be reasonable; they must be allocable to sponsored
agreements…. A cost may be considered reasonable if the nature of the goods or services acquired or applied, and the
amount involved therefore, reflect the action that a prudent person would have taken under the circumstances
prevailing at the time the decision to incur the cost was made. Major considerations involved in the determination of
the reasonableness of a cost are: whether or not the cost is of a type generally recognized as necessary for the operation
of the institution or the performance of the sponsored agreement….”



www.nsf.gov/oig                                             3                                              OIG 18-1-001
         on manuscripts and on the last set of experiments. The funds were to be used to support
         that effort, including supplies, graduate-student support, and travel to meetings to report
         results. KUCR acknowledged that there was minimal time remaining on the project, but
         per the PI, the NSF-sponsored project benefitted from the laser and this fact was used to
         allocate the cost to the NSF award. However, it is not reasonable that nearly 7 percent of
         the cumulative award budget was spent on equipment, not included in the budget, with
         only 3 percent of the award period remaining.
        $4,417 for the purchase of a software upgrade and 2 data loggers purchased on July 21,
         2011, on a 9-year award that expired July 31, 2011. The data loggers and software were
         available for 0.3 percent of the award period (10 out of 3,272 days). Per the cost principles,
         the allocation of a cost must be proportionate to the actual benefit received. 4 KUCR
         acknowledges that there was minimal time remaining on the project, but per the PI, the
         NSF-sponsored project and its outcomes benefitted from the software and this fact was
         used to allocate the cost to the NSF award. KUCR acknowledges that the data loggers and
         software had a useful life beyond the project end date, but the immediate need and benefit
         was directly associated with this project, and the charge was allocated according to the
         relative benefit received. However, it is not reasonable the data loggers were charged to
         this award with 0.3 percent of the award period remaining.

Materials Not Properly Allocated

We found that KUCR improperly allocated the purchase of an ignition box totaling $2,942. The
purchase of the ignition box was transferred to the NSF award without adequately documenting
the benefit to the award. 5 Per the transfer request, the entry was posted to correct a multi-project
expenditure that should have been split when it was originally charged. The transfer request stated
that the transaction was posted to correct the recording error when the error was identified, and
KUCR will ensure better communication to eliminate similar errors from occurring in the future.
However, when providing the documentation for audit, KUCR determined that the cost should not
have been allocated to this award and will process a refund to return the funds to NSF.

KUCR personnel did not adequately review the expenditures charged to the NSF awards, which
resulted in unreasonable equipment costs. Without a process in place to ensure costs are reasonable
and allowable, 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.




4
  According to 2 CFR 220, Appendix A, C.4, “[a] cost is allocable to a particular cost objective…if the goods or
services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or
other equitable relationship.”
5
  2 CFR 220, Appendix A, Section B.3 defines “allocation” as “the process of assigning a cost, or a group of costs to
one or more cost objective, in reasonable and realistic proportion to the benefit provided or other equitable
relationship.” Per Section C.4.a, “A cost is allocable to a particular cost objective (i.e., a specific function, project,
sponsored agreement, department, or the like) if the goods or services involved are chargeable or assignable to such
cost objective in accordance with relative benefits received or other equitable relationship. Subject to the foregoing, a
cost is allocable to a sponsored agreement if it is incurred solely to advance the work under the sponsored agreement;
it benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated
through use of reasonable methods…”


www.nsf.gov/oig                                             4                                              OIG 18-1-001
KUCR indicated that it has performed corrective actions to remove $2,942 in unreasonable and
unallowable costs from the award in question, leaving $169,088 unresolved. NSF, during the audit
resolution process, should ensure that the awards have been credited as appropriate.

Recommendations

We recommend that the NSF’s Director of the Division of Institution and Award Support (DIAS)
address and resolve the following KUCR recommendations:

   1. Resolve the $169,088 of questioned costs and ensure the $2,942 of questioned costs has
      been removed from the NSF award.
   2. Strengthen the administrative and management controls and processes over expenditures
      near the end of an award and allocation of equipment.

Summary of Awardee Response

Funding Issues

KUCR does not agree with the questioned costs totaling $135,071 for the purchase of a
microscope. KUCR believes the purchase was reasonable and consistent with a prudent person’s
actions, and is an allowable and allocable cost. KUCR agreed that overspending on a project is not
consistent with KUCR’s standard process. However, the purchase was appropriate and reasonable
in this case, because it was necessary for the performance of the award. Due to the unique
circumstance, KUCR sought guidance from NSF and the purchase of the microscope was then
directed by the NSF Program Officer. The award is a state-wide EPSCoR award, and the guidance
provided by the Program Officer was specific to the management of this large, multi-project award
related to clear underspending on some sub-projects. KUCR stated that 40 percent of the
equipment was purchased with NSF-sponsored funds, and the other 60 percent was purchased with
institutional commitments (cost share) to support the award and other research programs that used
the equipment.

Equipment and Materials Purchased at the End of the Award

KUCR does not concur with the questioned costs totaling $34,017. KUCR believes the purchases
were reasonable due to the project-specific circumstances surrounding the purchases. KUCR does
not routinely allow large expenditures at the end of the award; however, in both cases KUCR
discussed the expenditures with the PIs and determined the charges were allowable and necessary
to achieve project outcomes. KUCR provided justification from the PIs for both purchases
indicating the purchases were necessary to achieve and strengthen the final award results.

Materials Not Properly Allocated

KUCR agrees with the conclusion for the $2,942 of questioned costs. This cost has already been
removed from the award and the questioned amount was refunded to NSF in July 2016.

See Appendix A for the complete KUCR response.



www.nsf.gov/oig                                 5                                     OIG 18-1-001
Auditors’ Additional Comments

Funding Issues

Our conclusion remains unchanged regarding the $135,071 microscope purchase that KUCR
disagrees with. The additional information provided by KUCR did not change our view that
making spending decisions based on the possibility of reduced funding is not reasonable, prudent,
or consistent with existing policies. KUCR intentionally over-spent as a strategy to decrease the
unspent funds. KUCR stated that the purchase was reasonable and prudent because it was
necessary for the performance of the award; however, the equipment purchase exceeded the
original equipment budget by more than 145 percent, and KUCR did not provide any additional
documentation to support the allocation of 40 percent of this purchase cost to the award, as required
by Federal financial assistance requirements. Therefore, the report finding and recommendations
remain as stated.

Equipment and Materials Purchased at the End of the Award

Our conclusion remains unchanged for the $34,017 in equipment and materials purchased at the
end of the award that KUCR disagrees with. The additional information provided by KUCR did
not change our view that these purchases near the various award expiration dates should be
questioned. Per Federal financial assistance requirements, the allocation of a cost must be
proportionate to the actual benefit received. The laser equipment costing $29,600, was charged
100 percent to the NSF award when it was only available for 3 percent of the award life. The
software upgrade and data loggers were charged 100 percent to the NSF award and they were only
available for 10 days prior to the award expiration. Therefore, the report finding and
recommendations remain as stated.

Materials Not Properly Allocated

KUCR’s comment related to the $2,942 is responsive to the issue noted in the finding. Once NSF
determines that the recommendation has been adequately addressed, and the $2,942 in questioned
costs have been returned, this issue should be closed.

Finding 2: Unreasonable Travel
We identified several travel costs that did not appear reasonable and necessary for the awards
charged or were not in compliance with NSF requirements.

Travel Was Not Reasonable and Necessary

Unreasonable Travel Collaboration Expenses

We questioned four transactions totaling $54,273 charged to two NSF awards for one PI’s travel
expenses in      .




www.nsf.gov/oig                                  6                                      OIG 18-1-001
We questioned $37,735 charged to one NSF award for lodging in           from May 26, 2013, to
July 11, 2013 (46 days) and December 16, 2013, to January 20, 2014 (35 days).

The documentation provided was not sufficient to support the allocation of these costs to the NSF
award. 6 Adequate support for how the PI’s time in         (81 days) was beneficial and allocable
to this award was not provided. The itinerary provided by KUCR broke out the travel by week, not
by day, as required by the KUCR internal policy for foreign travel. 7 Additionally, due to an NSF-
requested budget reduction, travel was voluntarily reduced from $41,790 to $17,370 ($10,320
which included foreign travel). Although the PI reduced the travel budget to $17,000, more than
$25,000 was spent on lodging expenses during two extended trips to          . The PI stated that the
travel to       was necessary to collaborate; however, neither the original budget nor the revised
NSF approved budget mentioned the need for annual collaboration trips to           .

We also questioned $16,538 for meals and lodging charged to another NSF award while the same
PI was in            from May 29, 2011 to August 21, 2011 (84 days). The 3-month trip was
completed 10 days prior to the expiration of the 4-year award on August 31, 2011. The need for
the 3-month trip to           was not included in the NSF award budget. The NSF award budget
contained $10,800 for foreign travel, for one international trip per year for the PI's collaboration
visits in          (approximately $2,700 per trip). Per the PI, the collaboration with the
group was successful and by the fourth year of the project, new collaborations were identified in
        . The PI decided that the trip to     , instead of        , was more beneficial to the NSF
award; however, the 3-month collaboration was not mentioned in the final project report.

Additionally, the documentation to support the allocation methodology of the PI’s expenses while
in        was not adequate. The dollar amount allocated to the NSF award does not tie to the
explanation provided, and the benefit or other equitable relationship of the allocation was not
properly addressed.

Late Travel Reimbursement Claim

We questioned six transactions totaling $11,166 charged to one award for travel expenses for the
PI. For each of the six transactions, the travel expense claim was filed on December 14, 2012 —
3-months after the NSF award expiration. KUCR travel policies require travel expense claims be
submitted within 30 days after the completion of the trip. 8 The travel claims in question were
submitted anywhere from 263 to 1,329 days after the travel occurred.

Specifically, we question the following travel expenditures that were not submitted for
reimbursement timely:



6
  2 CFR 220, Appendix A, Section A.2.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.”
7
  Per KUCR international travel expense policies: “A daily itinerary is required to substantiate the business purpose
of the trip. Each travel day shall be identified as either business or personal.”
8
  Per KUCR travel policies: “Traveler is required to report and substantiate travel expenses within 30 days of the
date of travel.”


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    •    $1,702 for airfare to                           for the PI to attend a conference from October
         12-14, 2009. The airfare was from                              to                   , on October
         3, 2009;                       , to                           , on October 10, 2009; and
                             , to                            , on October 17, 2009. KUCR charged 50
         percent of the airfare cost to the NSF award as the                 portion did not relate to the
         NSF award. The travel expense claim was approved 1,154 days after the travel occurred.
    •    $1,826 for lodging and meals per diem, from October 10-17, 2009, for the PI to attend a
         conference in                           . The conference was from October 12-14, 2009. The
         PI charged per diem for the additional days stayed in                     before and after the
         conference. The travel expense claim was approved 1,154 after the travel occurred.
    •    $1,317 for conference registration fees for the PI. The conference was in                       ,
               , from April 19-25, 2009. The PI did not attend the conference in               due to visa
         issues. The travel expense claim was submitted 1,329 days after the event occurred.
    •    $2,920 for airfare to                      , from January 2-12, 2011, for the PI to attend a
         conference. The conference in             was from January 4-8, 2011. The travel expense was
         approved 702 days after the travel occurred.
    •    $1,760 for airfare to the                      , from March 14-18, 2012, for the PI to attend a
         workshop. The workshop in                            was from March 15-16, 2012. The travel
         expense was approved 271 days after the travel occurred.
    •    $1,641 for airfare to              , from March 21-26, 2012, for the PI to attend a workshop.
         The workshop in          was from March 23-24, 2012. The travel expense was approved 263
         days after the travel occurred.

PI and Co-PI travel expenses to                      ,          , and

We questioned three transactions totaling $10,763 (including the applicable F&A and ITTC fee)
charged to one NSF award for the PI and Co-PI’s travel expenses. The PI and Co-PI traveled from
July 4-25, 2012; the primary destination for the trip was a conference in                           ,
from July 9-13, 2012. There were stopovers in                ,           ;         ,           ; and
                  , and several personal days taken during the trip. The total cost of the trip was
$13,225 (not including the applicable F&A or ITTC fee), allocated 52 percent to the NSF award
and 24 percent each to two other Federal awards.

Based on the following, we conclude that the travel was not necessary, reasonable, or prudent for
the administration of the award: 9

    •    The conference in                       , was at the end of the NSF award life. The travel
         ended on July 25, 2012, and the award expired on August 31, 2012.
    •    There was no clear benefit or necessity for the stopovers in                             ;
                          ; or                  .

9
  2 CFR 220, Appendix A, Section C.2. and C.3 costs “must be reasonable; they must be allocable to sponsored
agreements…. A cost may be considered reasonable if the nature of the goods or services acquired or applied, and the
amount involved therefore, reflect the action that a prudent person would have taken under the circumstances
prevailing at the time the decision to incur the cost was made. Major considerations involved in the determination of
the reasonableness of a cost are: whether or not the cost is of a type generally recognized as necessary for the operation
of the institution or the performance of the sponsored agreement….”


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   •   We did not receive adequate documentation to support the allocation methodology. Per
       KUCR, the travel costs were allocated to the NSF award and two other Federal awards
       based on summer payroll. The benefit or other equitable relationship of the allocation was
       not addressed in the documentation provided.
   •   There was no foreign travel in the revised NSF award budget. The revised NSF award
       budget included $14,000 for domestic travel; this was a reduction in the travel budget by
       73 percent from the original NSF award budget.
   •   Although KUCR travel policies require travel expense claims to be submitted within 30
       days after the completion of the trip, the travel expense report was not submitted until
       September 24, 2012 — 56 days after the travel occurred and 24 days after the award
       expired.
   •   The travel was not mentioned in the final project report.

Table 4 describes the timeline for the trip and the total cost of $13,225. The table also shows the
breakout of personal versus business days per the PI and Co-PI; the personal days were not charged
to any awards.

Table 4. Description of Questioned PI and Co-PI Travel by Date and Location

                                         Personal                                     Travel
 Date             Location                Days         Description of Travel Cost      Cost
 July 4, 2012     Depart                  No           Two roundtrip airline tickets $ 816
                     ,     for                         from                  to
                             ,                                     .

 July 4, 2012                               No         Lodging                          $   343

 July 5, 2012                              Yes

 The PI and Co-PI purchased round-trip tickets from                              to               ,
            ; departing on July 4 and returning July 25. They stayed two nights in                ,
             (July 4-5). The hotel room was shared by the PI and Co-PI
      The cost of the room was $343 per night. The lodging per diem in                ,   , in July
 2012, was $169 per night. They charged one night to the NSF award and considered the other
 day a personal day. The PI and Co-PI stated that the nights stayed in            were for “travel
 recovery and to accommodate layovers for the flights.”
 July 6, 2012     Depart                   No          Two roundtrip airline tickets $ 4,709
                               ,                       from                        to
                  for                                                  to
                                                                to                  ;
                                                       departing       on July 6 and
                                                       returning July 22.
 July 6, 2012                              No                                           $ 261
 The PI and Co-PI stayed in                      for one night. The cost of the room was $261 per
 night. The lodging per diem in                    , in July 2012, was $177 per night.



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                                         Personal                                           Travel
 Date             Location                Days         Description of Travel Cost            Cost
 July 7, 2012     Depart                  No

                  for

 July 8, 2012                               No         Lodging while at conference      $     233
 July 9, 2012                               No         Lodging                          $     233
 July 10, 2012                              No         Lodging                          $     233
 July 11, 2012                              No         Lodging                          $     233
 July 12, 2012                              No         Lodging                          $     233
 July 13, 2012                              No         Lodging                          $     233
 The PI and Co-PI attended the
                         (July 9 through July 13, 2012) at the                                  .
 The conference registration and dinner for the PI and Co-PI totaled $1,720. They also presented
 a paper for the                            in            at the
 Workshop on July 9, 2012. The Co-PI did not register for the conference in            until July
 10, 2012, after the conference had already begun.
 July 14, 2012 Depart
                    for                     No

 July 14, 2012                              No         Lodging in                       $     379
 The PI and Co-PI flew to                     , on July 14 and stayed until the evening of July 15.
 The cost of the room was $276; the lodging per diem in            in July 2012 was $214. They also
 charged $103 for 5 extra hours in the hotel before their flight departed        the evening of July
 15. They stated that the stopover in              was to meet with a colleague. However, the
 documentation provided for audit did not support that this meeting was necessary or had any
 benefit to the award.
 July 15, 2012    Depart        ,          No
                      , for

 July 16, 2012                             Yes
 July 17, 2012                             No          Meeting with Dean                $     261
                                                       at the University
 July 18, 2012                             No          Meeting with Dean
                                                       at the University
 July 19, 2012                             Yes
 July 20, 2012                             Yes
 July 21, 2012                             Yes




www.nsf.gov/oig                                  10                                    OIG 18-1-001
                                                Personal                                      Travel
 Date               Location                     Days       Description of Travel Cost         Cost
 The PI and Co-PI Stayed in                        , from July 15-22, 2012. Per the handwritten
 documentation provided by the PI, the stopover in             was to meet with the Dean
 at the University           . Based on the original itinerary provided, the PI and Co-PI met with
 the Dean             on July 17 and 18. The remaining time in             was considered personal
 days. No documentation was provided to support the benefit to the award for the meetings with
 the Dean            nor were the meetings mentioned in the final report. The cost of the room was
 $261 per night; the lodging per diem in                    , in July 2012 was $177 per night. They
 only claimed 1 night for travel reimbursement.
 July 22, 2012      Depart                        No

                    for

 July 23, 2012                         ,         Yes        Lodging                       $      394

 July 24, 2012                                   Yes

 July 25, 2012      Depart                        No
                                   ,
                    for

 The PI and Co-PI returned to                    , on July 22, 2012. The documentation provided
 shows they stayed at a                    , hotel for three nights, July 23-26. They charged one
 night lodging to the award and considered the other 2 days personal days. They said that the night
 charged to the NSF award was for travel recovery. The roundtrip airline ticket purchased from
                    to                , was to depart                on July 25. However, based on
 the receipts provided, the PI and Co-PI checked out of the hotel in                on July 26.
 Additional Charges
 Conference
               Registration cost for PI and Co-PI and conference dinner                   $     1,720
 registration
 Per Diem      PI and Co-PI each charged 15 breakfast, 12 lunch, and 14 dinners to
                                                                                          $     2,342
               the awards (conference meals were deducted).
 Taxi                                                                                     $      532
 Telephone                                                                                $        70
 Total Charges                                                                            $    13,225
Source: Auditor analysis of questioned transactions

Unreasonable Travel

We questioned five transactions totaling $8,108 charged to five awards for unreasonable travel
expenses:




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    •    $4,729 charged to one award for a 44 night stay at a rental property in         . No support
         was provided to show why the 44 night stay in             was necessary or how it benefitted
         the award. Based on the response provided by KUCR, the airfare for this trip was charged
         to a Department of             award, and the hotel, meals, and other expenses were split
         between another Federal award and this NSF award. The methodology for the allocation
         of costs to the three awards was not adequately explained and/or supported. Additionally,
         the travel to          was not mentioned in the final project report.
    •    $1,530 charged to one award for travel expenses for the PI to travel to           . No travel
         costs were included in the approved budget; the entire award budget included only
         participant support. Per NSF regulations, costs for employees are not to be paid out of
         participant support and funds provided for participant support may not be used for other
         categories of expense without specific NSF written approval. 10 NSF did not provide
         specific written approval for the rebudgeting of participant support funds on this award.
         Additionally, the airline ticket charged to the NSF award included two legs; the first stop
         was in             for 3 days and then               for 19 days.               was the PI's
         sabbatical focal point. Charging the                  portion is also not reasonable as that
         portion of the travel was not related to the NSF award.
    •    $821 charged to one NSF award for meals from August 26-29, 2013, while the PI was
         staying in                 . The documentation provided shows that $855 was charged for
         10 meals. Based on the per diem calculator provided by KUCR, the per diem for
         international travel is $92 per day ($18 for breakfast, $28 for lunch, and $46 for dinner).
         The 10 meals noted in the documentation, the 3 breakfast, 4 lunch, and 3 dinner, result in
         an allowable per diem of $304. We questioned the difference between the actual charged
         and the allowable per diem plus the applicable F&A.
    •    $822 charged to one award for the cost of airfare from                          , to        ,
                       , from June 14-17, 2011. The PI had to cancel the trip due to
           . The canceled trip provided no benefit to the NSF award. KUCR agreed that the costs
         should be removed from the award.
    •    $206 for hotel cancellation fees charged to one award. KUCR discovered the error when
         providing the audit documentation and has taken corrective action to remove the charges.

Travel Near or After Award Expiration

We questioned four transactions totaling $7,174 charged to three NSF awards for travel occurring
at or near the award expiration.
    • $3,321 for airfare for the PI. The airfare was to          , departing May 19, 2012, and
        returning July 27, 2012, however, the NSF award expired on June 30, 2012; the return
        flight occurred after the NSF award expiration. The travel expense claim was dated
        September 28, 2012, 63 days after the travel ended and 90 days after the award expiration.


10
   NSF GPG (effective Jan. 18, 2011) Chapter V, (B.8.a) Participant Support Costs states, “Participant support costs
are direct costs for items such as stipends or subsistence allowances, travel allowances and registration fees paid to or
on behalf of participants or trainees (but not employees) in connection with meetings, conferences, symposia or
training projects…Funds provided for participant support may not be used for other categories of expense without the
specific prior written approval of the NSF cognizant Program Officer."



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       Additionally, a note on the travel expense claim stated, “Traveler claiming $2,274.45 of
       the $2,492.60 of airfare to close out project grant.”
   •   $2,596 charged to one award for airfare to                       , from May 22, 2012, to June
       6, 2012, for the PI to visit project collaborators at two universities in    . The NSF award
       expired on May 31, 2012; the return leg of the airfare was after the award expiration.
       Documentation provided notes that the PI took personal time from June 1-5, 2012. We did
       not receive adequate documentation to support how meeting with collaborators 7 days
       before award expiration was necessary for the award. There was no foreign travel in the
       NSF award budget and no mention of the travel or collaborations in the final report.
   •   $1,257 charged to one award for airfare for the PI from               to          on June 27,
       2012, and             to          on July 15, 2012. The NSF award expired on June 30, 2012.
       The PI was invited to collaborate at two different universities in the month of July.
       However, these collaborations occurred after award expiration, and, therefore, could not
       benefit the award.

KUCR personnel did not adequately review the expenditures charged to the NSF awards, which
resulted in unreasonable travel costs. Without a process in place to ensure costs are reasonable and
allowable, 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.

KUCR indicated that it has performed corrective actions to remove $1,028 in unreasonable and
unallowable costs from the awards in question, leaving $90,456 unresolved. NSF, during the audit
resolution process, should ensure that the awards have been credited as appropriate.

Recommendations

We recommend that the NSF’s Director of the DIAS address and resolve the following KUCR
recommendations:

   1. Resolve the $90,456 of questioned costs and ensure the $1,028 of questioned costs has
      been removed from the NSF awards.
   2. Strengthen the administrative and management controls and processes over travel costs.

Summary of Awardee Response

Unreasonable Travel Collaboration Expenses

KUCR believes the travel expenses are allowable and reasonable and were shown to benefit the
projects to which they were charged. KUCR stated that the travel allowed intense and non-
interrupted work between the PI and               experts in                   theory, and was thus
deemed beneficial and reasonable by KUCR. KUCR reviewed the itineraries and determined that
they were sufficient, since the PI was in the same location and performed similar collaborative
activities for the week-long period detailed in the itinerary. The PI’s understanding of the purpose
of the final technical report was to report the outcomes of the research, not how they arrived at
those outcomes, thus the trips that allowed the research to be completed were not explicitly listed
in the reports.


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The cost allocation for the travel was determined by the PI based on the amount of time he spent
focusing on the NSF versus the           projects and the proportional contribution of the
collaboration work to papers, presentations, talks and other outcomes for both projects. The PI has
the in-depth understanding of the technical work and the benefit of the trip across different projects,
and has stated that the proportional benefit of the trip to the NSF award can reasonably be estimated
at 30 percent. KUCR believes that the expertise of the PI and their determination of benefit is a
reasonable way of allocating costs.

Late Travel Reimbursement Claim

KUCR accepts the findings made with respect to the late travel reimbursement claims. The
University of Kansas has recently changed its policy and adopted the IRS’s 60-day travel
reimbursement requirement.

PI and Co-PI travel expenses to              ,         , and

KUCR believes the travel questioned totaling $10,763 was necessary and reasonable for the award.
The presentation of research findings at conferences, such as the one in                        , is
deemed beneficial to the project and is seen as part of the dissemination and sharing of research
results with colleagues. KUCR stated that the documentation was provided during the audit to
demonstrate that the purpose of the          stay was for the PI to collaborate with a colleague at
the University           . Such an outreach program is also part of the broader impact for the NSF
award, and this demonstrates that the collaboration travel expense is reasonable, because it
supported the furtherance and aims of the NSF award. KUCR stated that the stays in
were taken as personal days between travel days and hotels were only paid on travel days, which
is a reasonable expense related to the NSF award. KUCR contends that the effort allocation is a
reasonable way to determine proportional benefit.

Unreasonable Travel

KUCR accepts the finding totaling $8,108 in unreasonable travel charges. KUCR has already
removed the costs for the airfare to                   and the hotel cancellation fee. KUCR will
work with NSF to resolve the other costs questioned in this area and is strengthening controls and
improving processes around travel.

Travel Near or After the Award Expiration

KUCR accepts some of the findings for the travel near or after the award expiration; $3,321 and
$1,257 for airfare for PIs. KUCR will work with NSF to address the costs associated with these
findings and is working to improve controls and processes. KUCR believes the $2,596 for the PI
travel in       was reasonable, even though the travel was at the end of the project. Per the PI, the
travel benefited the project by furthering the dissemination of research at an international
conference. KUCR believes the travel expenses were directly related to the dissemination of
research results produced by this award and that the travel expenses should therefore be allowable.
The trip was taken from May 22, 2012 through June 6, 2012; personal time that was not charged




www.nsf.gov/oig                                   14                                      OIG 18-1-001
to the award was taken from June 1, 2012 through June 5, 2012 since the award expired on
May 31, 2012.

See Appendix A for the complete KUCR response.

Auditors’ Additional Comments

Unreasonable Travel Collaboration Expenses

Our conclusions remain unchanged for the questioned $54,273 in unreasonable travel
collaboration expenses. The additional information provided by KUCR did not change our view
that the documentation provided was not sufficient to support the allocation of these costs to the
NSF awards. Charging $37,735 for 81 days lodging for the PI in            to one NSF award, and
$16,538 for 84 days of meals and lodging for the PI in              to another NSF award was
unreasonable and unnecessary. Neither of the NSF awards mentioned the need for annual
collaboration trips to       and these extended trips to        were not included in the award
budgets. KUCR could not provide daily itineraries for the extended trips to        to support the
collaboration and work that was being completed. For the $16,538 for meals and lodging, the
additional explanation provided by KUCR does not address why the dollar amount allocated to the
NSF award does not agree to the explanation provided, and KUCR did not provide additional
documentation to support the allocation of 30 percent of the cost to the award, as required by
Federal financial assistance requirements. Therefore, the report finding and recommendations
remain as stated.

Late Travel Reimbursement Claim

Our conclusion remains unchanged for the questioned $11,166 for late travel reimbursement
claims charged to the NSF award. The travel expense claims were filed 3-months after the NSF
award expiration and submitted anywhere from 263 to 1,329 days after the travel occurred, which
is not reasonable. KUCR did state they have changed their policy in regards to late travel
reimbursement. However, the report finding and recommendations remain as stated.

PI and Co-PI travel expenses to            ,         , and

Our conclusion remains unchanged for the $10,763 charged to the NSF award for the PI and Co-
PI’s travel expenses. The additional information provided by KUCR did not change our view that
the travel was not necessary, reasonable, or prudent for the administration of the award and should
be questioned. The documentation provided during the audit did not support the benefit to the
award for the meetings with the Dean              in         . KUCR did not provide any additional
documentation to support the allocation of the charges between the NSF award and the two other
Federal awards. Therefore, the report findings and recommendations remain as stated.

Unreasonable Travel

KUCR’s comments related to the $822 airfare to               and $206 hotel cancellation fee are
responsive to the issues noted in the finding. Once NSF determines that the recommendation has


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been adequately addressed, and the $1,028 in questioned costs has been returned, this issue should
be closed.

Our conclusion remains unchanged for the remaining $7,080 of unreasonable travel expenses.
KUCR has stated they will work with NSF to resolve the remaining $7,080 of other questioned
costs in this finding.

Travel Near or After the Award Expiration

KUCR’s comment related to the $4,578 in travel charges is responsive to the issue noted in the
finding. Once NSF determines that the recommendation has been adequately addressed, and the
$4,578 in questioned costs has been returned, this issue should be closed.

Our conclusion remains unchanged for the $2,596 in travel charges that KUCR disagrees with.
The additional information provided by KUCR did not change our view that the international travel
charges for the PI to collaborate at two universities in     , 7 days prior to award expiration, was
not necessary for the award. KUCR did not provide any additional documentation to support the
need or benefit to the award for the meetings with the collaborators. Therefore, the report findings
and recommendations remain as stated.

Finding 3: Inadequate Documentation and Unallowable Participant Support
We identified $42,054 of participant support costs charged to one award that were not adequately
supported or were not in compliance with NSF requirements.

For one transaction selected, KUCR was unable to provide the documentation necessary to support
the expenditures, resulting in $14,055 of questioned costs. This documentation is required to be
maintained and available per Federal and NSF regulations and KUCR policies. Per KUCR, the
invoices could not be recovered from the archival storage as they were stored by check number
and they do not have a crosswalk to retrieve this information.

Per KUCR policies, one of the most important underlying principles for determining the
allowability and appropriateness of charges is ensuring that transactions are adequately
documented. Adequate documentation includes an invoice or receipt that identifies what was
purchased, where it was purchased, and who purchased it. 11 According to Federal requirements,
financial records, supporting documents, statistical records, and all other records pertinent to an
award shall be retained for a period of 3 years from the date of submission of the final expenditure
report. One exception is if an audit is started before the expiration of the 3-year period, then the
records shall be retained until all claims or audit findings involving the records have been resolved


11
  According to General Rules for the Use of Funds Deposited or Held in KUCR Accounts, “One of the most important
underlying principles for determining the allowability and appropriateness of charges is ensuring that transactions are
adequately documented. Adequate documentation includes an invoice or receipt that identifies WHAT was purchased,
WHERE it was purchased, and WHO purchased it. In addition, WHEN it was purchased may also be a deciding factor
on allowability.”



www.nsf.gov/oig                                           16                                            OIG 18-1-001
and final action taken. 12 Because KUCR was notified of the audit on October 6, 2014, we question
the following transaction charged to one NSF award due to the lack of adequate documentation.

Table 5. Description of Questioned Transaction Due to Inadequate Documentation

                                                        Award              Typical                              New
                                                         Final            Retention       Date KUCR          Retention
                                     Total            Expenditure        Period End       was Notified         Period
         Description               Questioned*           Date               Date           of Audit          End Date
                                                                                                             Once the
                                                                                                                audit
                                                                                                              findings
 Journal Entry Moving
                                                                                                             have been
 Participant Travel
                                         $14,055       03/23/2013        03/23/2016         10/06/2014        resolved
 Transactions and a Server
                                                                                                              and final
 Hosting Charge
                                                                                                             action has
                                                                                                                been
                                                                                                               taken.
 Total                              $    14,055
Source: Auditor analysis of questioned transactions
*
  Total questioned includes the applicable F&A

We also questioned $9,499 charged to participant support for travel costs for KUCR employees
and $18,500 for payments to an independent contractor for a server reconfiguration. In the NSF
approved budget, participant support funds were requested to support the participation in a
symposium and for trips for an expert in biology, not travel for KUCR employees or work by an
independent contractor. Per NSF regulations, costs for employees are not to be paid out of
participant support and funds provided for participant support may not be used for other categories
of expense without specific NSF written approval. 13 NSF did not provide specific written approval
for the rebudgeting of participant support funds on this award.

KUCR did not sufficiently plan for the retrieval of archived documentation, and did not adequately
review the expenditures reallocated to participant support which resulted in unreasonable and
unallowable costs. Without a process in place to ensure that documentation is available and
accessible and the reallocation of expenses are in accordance with Federal and NSF requirements,


12
   According to 2 CFR 215.53(b), “Financial records, supporting documents, statistical records, and all other records
pertinent to an award shall be retained for a period of three years from the date of submission of the final expenditure
report or, for awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual
financial report, as authorized by the Federal awarding agency.” There are limited exceptions to this rule, one of which
is “if any litigation, claim, or audit is started before the expiration of the 3-year period, the records shall be retained
until all litigation, claims or audit findings involving the records have been resolved and final action taken.”
13
   NSF GPG (effective Jan. 18, 2011) Chapter V, (B.8.a) Participant Support Costs states, “Participant support costs
are direct costs for items such as stipends or subsistence allowances, travel allowances and registration fees paid to or
on behalf of participants or trainees (but not employees) in connection with meetings, conferences, symposia or
training projects….Funds provided for participant support may not be used by grantees for other categories of expense
without the specific prior written approval of the cognizant NSF Program Officer."



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there is the increased risk that funds may not be used as required to accomplish the necessary
project objectives.

Recommendations

We recommend that the NSF’s Director of the DIAS address and resolve the following KUCR
recommendations:

     1. Resolve the $42,054 of questioned costs.
     2. Strengthen the administrative and management controls and processes related to document
        retention and review of expenditures charged to participant support.

Summary of Awardee Response

KUCR concurs with this recommendation and has already taken steps to start a review of the
current retention and storage process to ensure all necessary documentation is stored in a manner
that is accessible for the required length of time. KUCR was able to provide some documentation
to support the transactions, but they were not able to provide all original vouchers. Improved
processes for reviewing rebudgeting of participant support costs have already been implemented.
KUCR has provided additional training for staff members on the use of participant support funds.

See Appendix A for the complete KUCR response.

Auditors’ Additional Comments

Although KUCR concurred with the recommendations, it did not specifically address the
questioned costs totaling $42,054, therefore our conclusion remains unchanged. KUCR could not
provide documentation to support $14,055 in costs charged to the NSF award; and the $27,999
charged to the award for employee travel and server reconfiguration which are unallowable
participant support charges per NSF regulations. Therefore, the report finding and
recommendations remain as stated.

Finding 4: Improper ACM$ Request
Due to a transposition error, a funding adjustment request totaling $13,047 on July 10, 2015, was
drawn in error on an award that expired July 31, 2014. Advances or reimbursements made in error
must be refunded promptly. 14 KUCR agrees that a refund in the amount of $13,047 is due and will
return the funds to NSF. To address this error, KUCR completed a review of retroactive funding
adjustments in June 2016. As a result of the review, KUCR implemented system and process
changes to allow for better tracking and management of the funding adjustments. Because of this
improper ACM$ funding request, we question $13,047 for the refund due to NSF.




14
   NSF AAG, (effective January 4, 2010) Chapter III, D.2, “Advances or reimbursements made in error must be
refunded to the National Science Foundation…Excess funds should be promptly refunded electronically or by check.”


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Recommendations

We recommend that the NSF’s Director of the DIAS address and resolve the following KUCR
recommendations:

     1. Ensure the $13,047 of questioned costs has been removed from the NSF award.
     2. Strengthen the administrative and management controls and processes to ensure that
        funding requests are properly prepared and executed.

Summary of Awardee Response

KUCR agrees that there was a data entry error in the ACM$ draw. To address this error, a refund
in the amount of $13,047 was returned to NSF, and KUCR completed a review of retroactive
funding adjustments to determine possible process improvements. As a result of the review in June
2016, KUCR strengthened administrative and management controls by implementing a process to
allow for better tracking and management of funding adjustments.

See Appendix A for the complete KUCR response.

Auditors’ Additional Comments

KUCR’s comment related to the $13,047 is responsive to the issue noted in the finding. Once NSF
determines that the recommendation has been adequately addressed, and the $13,047 in questioned
costs has been returned, this issue should be closed.

Finding 5: Unreasonable or Unallowable Transactions

We identified four transactions totaling $8,838 charged to two NSF awards that did not appear
reasonable, necessary, or prudent for the awards charged.

Unreasonable Cost Transfers

We questioned two transactions totaling $6,988 charged to one NSF award. 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. 15 We identified a cost transfer posted 1 year after
the award expired that was not reasonable, necessary, or prudent. Therefore, we question $6,988
for the cost of contractual services and a computer that were transferred from one NSF award to
another NSF award, significantly after the original purchases and after the original award expired.

Specifically, we question $3,721 for contractual services transferred over 20 months after the
services were performed and 1 year after the award expired. At the time of the original recording,
the PI certified that the work was performed for the award that expired September 30, 2012. We

15
  According to 2 CFR 220, Appendix A, Sections C.2. and C.3, costs “must be reasonable; they must be allocable to
sponsored agreements…. Major considerations involved in the determination of the reasonableness of a cost are:
whether or not the cost is of a type generally recognized as necessary for the operation of the institution or the
performance of the sponsored agreement….”


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also question $3,267 for a computer transferred 19 months after the computer was purchased and
1 year after the award expired. The authorized receipt provided for audit noted that the computer
was also to be recorded to the expired award, not the award it was transferred to.

On September 19, 2013, 1 year after the award expired, a journal entry was made to move the
charges from award              (expired September 30, 2012) to award              (expired June 30,
2016). Per the description provided, the transfer was made to move the expenses to correct the
over expenditure and to close out the project. Federal regulations prohibit the shifting of costs due
to cost overruns or other funding considerations. 16 Additionally, per KUCR policy, an explanation
is necessary if the transfer occurs more than 90 days after the expense was originally posted. An
adequate explanation for the late transfer was not provided.

Table 6. Description of Questioned Unreasonable Cost Transfers
                                                                                                    Days After
                                     Total                                                           Original
 Description                      Questioned*  Date Purchased               Date Transferred          Entry
 Consulting Services               $ 3,721 December 12, 2011                September 19, 2013         647
 Apple Mac Mini Computer                3,267 February 24, 2012             September 19, 2013         573
 Total                             $    6,988
Source: Auditor analysis of questioned transactions
*
  Total questioned includes the applicable F&A

Promotional Purchases and Advertising Were Not Reasonable or Necessary

We questioned two transactions totaling $1,850 charged to one NSF award that were unallowable
promotional and advertising costs. The purchase of the promotional items and memorabilia,
including models, gifts, and souvenirs were not specific purchases necessary to meet the
requirement of the agreement. The only allowable advertising costs are those that are solely for
specific purposes identified in applicable regulations and for other specific purposes necessary to
meet the requirements of the sponsored agreement. 17 These promotional items and advertising
costs for one NSF award are therefore unallowable, and will be questioned.

We question $1,377 for the purchase of polo shirts. Per KUCR, the shirts were purchased for the
                                                          Research Team while participating in
fieldwork on the project. KUCR stated that the purchase meets the “other specific purpose”
criteria; however, the shirts were not necessary to meet the requirements of the sponsored



16
   2 CFR 220, Appendix A, Section C.4.b states, “Any costs allocable to a particular sponsored agreement under the
standards provided in this Appendix may not be shifted to other sponsored agreements in order to meet deficiencies
caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored
agreement, or for other reasons of convenience.”
17
   According to 2 CFR 220, Appendix A, Section J.1.f(3) and J.1.c(4), “Unallowable advertising and public relations
costs include….costs of promotional items and memorabilia, including models, gifts, and souvenirs.” The only
allowable “advertising costs are those that are solely for[three specific purposes and for] other specific purposes
necessary to meet the requirement of the sponsored agreement.”



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agreement. As such, we contend that this charge is unallowable and was not reasonable, or
necessary for the performance of this NSF sponsored project. 18

We also question $473 for Facebook advertising fees charged to this award. Per KUCR, the entire
cost has been subsequently removed from the project. The original charge was inadvertently posted
to this award due to a data entry error.

Table 7. Description of Questioned Promotional and Advertising Costs
                                       Invoice                                   Total
 Description                           Amount                 F&A              Questioned         KUCR Agreed
 Polo Shirts                             $     940             $ 437              $ 1,377            No
 Facebook Advertisements                       324                149                   473          Yes
 Total                                   $ 1,264               $ 586              $ 1,850
Source: Auditor analysis of questioned transactions

KUCR personnel did not adequately review the expenditures charged to the NSF awards, which
resulted in unreasonable and unallowable costs. Without a process in place to ensure costs are
reasonable and allowable, 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.

KUCR indicated that it has performed corrective actions to remove $473 in unreasonable and
unallowable costs from the award in question, leaving $8,365 unresolved. NSF, during the audit
resolution process, should ensure that the awards have been credited as appropriate.

Recommendations

We recommend that the NSF’s Director of the DIAS address and resolve the following KUCR
recommendations:

     1. Resolve the $8,365 of questioned costs and ensure the $473 of questioned costs has been
        removed from the NSF awards.
     2. Strengthen the administrative and management controls and processes for reviewing costs
        to ensure that unallowable promotional items and advertising costs are not charged to NSF
        awards.

Summary of Awardee Response

KUCR accepts some of the findings related to the “Unreasonable Cost Transfers”, and is working
to implement stronger administrative and management controls and processes related to reviewing
costs to ensure allowability of cost transfers on sponsored projects. In regards to the “Promotional
Purchases and Advertising Were Not Reasonable or Necessary” finding, KUCR agrees that the
advertising costs were not allowable and has moved this cost off the NSF award. However, KUCR

18
  2 CFR 220, Appendix A, Section C.2. and C.3 states costs “must be reasonable; they must be allocable to sponsored
agreements…. Major considerations involved in the determination of the reasonableness of a cost are: whether or not
the cost is of a type generally recognized as necessary for the operation of the institution or the performance of the
sponsored agreement.”


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believes that the shirt costs were necessary as they helped interviewers to identify themselves to
subjects and allowed for successful completion of the fieldwork funded on the project. KUCR
stated they provided documentation from the award proposal that described the fieldwork of the
research team that would justify this type of purchase on the award. KUCR believes this charge is
reasonable and allowable on this project.

See Appendix A for the complete KUCR response.

Auditors’ Additional Comments

KUCR did not specifically address the questioned $6,988 charged to the NSF award for
unreasonable cost transfers, therefore our conclusion remains unchanged. Although KUCR
indicated it accepts these findings and has working to make improvements in this area, their
response did not change our view that the cost transfers were not reasonable, necessary, or prudent
and therefore, the report finding and recommendations remain as stated.

KUCR’s comment related to the $473 in advertisements is responsive to the issue noted in the
finding. Once NSF determines that the recommendation has been adequately addressed, and the
$473 in questioned costs has been returned, this issue should be closed.

Our conclusion remains unchanged for the $1,377 for the purchase of polo shirts that KUCR
disagrees with. The additional information provided by KUCR did not change our view that the
polo shirts were not necessary to meet the requirements of the sponsored agreement, and therefore,
were not reasonable or necessary for the award. The report finding and recommendations remain
as stated.

Finding 6: Purchases before Award Effective Date
We questioned $1,596 charged to one NSF award for purchases more than 90 days prior to the
award effective date without NSF approval.

Grantees may incur pre-award costs within the 90-day period preceding the effective date of the
grant as long as the costs are properly documented and necessary; however, requests for pre-award
costs for periods exceeding 90 days must be submitted electronically in FastLane. 19

KUCR charged subawardee data collection and entry charges incurred on April 17, 2012, and May
24, 2012, on an award with an effective date of October 1, 2012. KUCR did not obtain NSF
approval for these pre-award charges more than 90 days prior to the award effective date.




19
   NSF AAG, Chapter V, Section A. 2.b(i),(iii) Pre-Award Costs “Grantees may incur allowable pre-award costs
within the 90 day period immediately preceding the effective date of the grant providing [that the costs are documented
in accordance with the grantee’s procedures and necessary for the effective and economical conduct of the project,
but] .….[r]equests for pre-award costs for periods exceeding 90 days must be submitted electronically via use of the
Notification and Request module in FastLane.”


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KUCR has agreed that $150 took place before the 90-day period; however, it stated that because
the subaward start date was August 19, 2012, the allowed 90-day spending period began May 21,
2012, and therefore, the remaining costs of $865 were allowable.

However, because the NSF’s guidance relates to the NSF award effective date, and not the
subaward effective date, we continue to question $1,596 for the April 17 and May 24, 2012
transactions as noted in Table 8:

Table 8. Description of Questioned Purchases before the Award Effective Date
                        Days
                       Before
                       Award
                      Effective         Invoice                                         Total
 Service Date           Date            Amount             ITTC Fee      F&A          Questioned
 April 17, 2012         167                $ 150              $     10     $    75        $    235
 May 24, 2012           130                     865                 61         435           1,361
 Total                                     $ 1,015            $     71    $    510        $ 1,596
Source: Auditor analysis of questioned transactions

The established KUCR internal controls were not adequate to prevent the pre-award costs from
being charged to the awards, to ensure a clear understanding of the rule by KUCR employees, to
identify the errors before the final report, or to guarantee the requests to exceed the 90-day period
prior to the effective date of the award were submitted to NSF. As a result of inadequate internal
controls, pre-award costs were charged to the NSF awards in violation of NSF’s policies. Without
adequate controls to ensure costs charged more than 90 days prior to the award expiration have
been approved by NSF, 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.

Recommendations

We recommend that the NSF’s Director of the DIAS address and resolve the following KUCR
recommendations:
    1. Resolve the $1,596 of questioned costs.
    2. Strengthen the administrative and management controls and processes to guarantee that
       employees understand the guidance and to ensure charges occurring more than 90 days
       prior to the award effective date are not charged to an award without NSF approval.

Summary of Awardee Response

KUCR concurs with this recommendation. KUCR will work to strengthen the controls and
processes to ensure charges occurring more than 90 days prior to the award effective date are not
charged to an award without NSF approval. The University of Kansas is implementing a new
financials system that has functionality to clearly track pre-award spending. KUCR will create a
business process that utilizes this system functionality and ensure that sponsor approval for pre-
award spending greater than 90 days is obtained and documented.
See Appendix A for the complete KUCR response.



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Auditors’ Additional Comments

KUCR concurred with the recommendations in the finding, but did not specifically address the
$1,596 in questioned costs. KUCR’s comments are responsive to the recommendation to
strengthen controls on pre-award spending and once NSF determines that this recommendation
has been adequately addressed, the issue should be closed. Our conclusion remains unchanged for
the questioned $1,596 charged to the NSF award for purchases more than 90 days prior to the
award effective date without NSF approval.

Other Matter:
Effort Reporting Not Completed Timely and Completely
During our audit, we reviewed 14 payroll transactions and the related effort reports. Six of the
effort reports reviewed were dated in July 2016; several years after the actual payroll charges were
incurred and after the effort reports were requested for this audit.

Federal Regulations require, at least annually, a statement be signed by the employee, PI, or
responsible official(s) using suitable means of verification that the work was performed. 20
Additionally, per KUCR’s effort report policy, certification of effort reports is required at least
once every 6 months for non-student employees. 21

KUCR explained that in late 2014, it conducted an internal review of its existing effort reporting
practices and identified several opportunities to strengthen internal controls and improve
compliance. According to KUCR, it had conducted an in-depth review and inventory of all effort
reports for certification periods from 2010-2015. This initiative involved identifying and following
up on all required effort reports for this period. As of July 2016, KUCR stated it had obtained 98
percent compliance for this certification period and was still working with the research community
to achieve 100 percent compliance. KUCR recognizes that in some cases, including some
transactions included in this audit, effort may have been certified significantly after the
certification period and associated payroll period, and it has worked closely with its PIs and
research community to ensure posted payroll accurately reflects the work performed in the
associated time period.

Additionally, in 2015, KUCR’s research administration team embarked on an initiative to develop
more robust policies and processes for effort certification, review, and monitoring. These updated
policies and practices have since been widely communicated to the University of Kansas research
community and are part of a broader educational effort to ensure that PIs understand their role and
responsibilities within the process.

20
   2 CFR 220, Appendix A, Section J.10.c(1)(e) “At least annually a statement will be signed by the employee,
principal investigator, or responsible official(s) using suitable means of verification that the work was performed,
stating that salaries and wages charged to sponsored agreements as direct charges, and to residual, F&A cost or other
categories are reasonable in relation to work performed.”
21
   Per KUCR’s effort reporting and certification policy, “The effort reporting system will periodically require the
certification by the appropriate individual or responsible official to validate the percentage of effort committed to all
university activities during the reporting period… Certification will be required at least once every six months for
non-student employees.”


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Finally, KUCR completed the implementation of an electronic effort certification system. In July
2016, KUCR deployed the new system to certify the effort period of December 2015 through June
2016. According to KUCR, the system facilitates recertification of effort due to payroll cost
transfers; ensures certification of payroll appointments that were processed late; enables effort
report retention and reporting on certifications; and provides increased transparency and controls
over the process.

KUCR’s system changes were outside the scope of our audit; therefore, we have not performed
any procedures to determine the effectiveness of this system.

Although KUCR’s effort reporting system did not appear to be compliant with Federal regulations
during our audit period, we did not question any associated costs because the errors we identified
were corrected during our audit.

Recommendation

We recommend that the NSF’s Director of the DIAS address and resolve the following KUCR
recommendation:

   1. Determine if the changes in the effort reporting system and related policies and procedures
      are effective in ensuring that KUCR’s current effort reporting activities are in compliance
      with Federal regulations.

Summary of Awardee Response

KUCR has made changes to its effort reporting system, policies, and procedures in recent years.
In July 2016, KUCR implemented electronic effort certification. Starting in 2015, a complete
revision of the processes and policies for effort certification at the University of Kansas was
implemented in conjunction with the implementation of electronic certification. These updated
policies and practices have been widely communicated to the University of Kansas research
community to ensure PIs and campus personnel understand their role and responsibilities within
the process. The controls the electronic certification system provides, in conjunction with the
improved processes and education for certifiers, reasonable assurance that KUCR is compliant
with Federal regulations.

See Appendix A for the complete KUCR response.

Auditors' Additional Comments

KUCR’s comments related to the effort reporting not completed timely or completely is responsive
to the issues noted in the finding. Once NSF determines that the recommendation has been
adequately addressed, the issue should be closed.



October 18, 2017



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Appendix A: Awardee Response




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Appendix B: Objective, Scope, Methodology and Criteria
Objective

To determine if costs claimed by KUCR 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
KUCR through the Award Cash Management $ervice for the 3-year period beginning October 1,
2011, through September 30, 2014. NSF OIG obtained from KUCR all award transactions
comprising all costs claimed to NSF during this period. This provided an audit universe of
approximately $72 million, in more than 119,000 transactions, across 289 individual NSF awards.
For transaction testing, NSF OIG judgmentally selected 250 transactions totaling more than $2.2
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 KUCR in Lawrence, Kansas. Onsite fieldwork was conducted during March and April 2017. At
the conclusion of our fieldwork, we provided a summary of our results to NSF OIG personnel for
review. We also provided the summary of results to KUCR personnel to ensure that they were
aware of each of our findings and did not have any additional documentation to support the
questioned costs.

KUCR management is responsible for establishing and maintaining effective internal control to
help ensure that Federal award funds are used in compliance with laws, regulations, and award
terms. In planning and performing our audit, we considered KUCR’s internal control solely for the
purpose of understanding the policies and procedures relevant to the financial reporting and
administration of NSF awards in order to evaluate KUCR’s compliance with laws, regulations,
and award terms applicable to the items selected for testing, but not for the purpose of expressing
an opinion on the effectiveness of KUCR’s internal control over award financial reporting and
administration. Accordingly, we do not express an opinion on the effectiveness of KUCR’s internal
control over its award financial reporting and administration.

This performance audit was conducted in accordance with Generally Accepted Government
Auditing Standards. Those standards require that we plan and perform 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

At NSF OIG’s request, KUCR provided detailed transaction data for all costs charged to NSF
awards for the period October 1, 2011, through September 30, 2014. NSF OIG reviewed available
accounting and administration policies and procedures, relevant documented management



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initiatives, previously issued external audit reports and desk review reports, and schedules and
reconciliations prepared by KUCR and agreed them to supporting accounting records.

After verifying that the population of data was appropriate, NSF OIG analyzed the data contained
in the KUCR general ledger and supporting detailed ledgers to identify anomalies, outliers, and
aberrant transactions. NSF OIG then judgmentally selected a sample of transactions to test based
on NSF OIG-defined criteria.

NSF OIG identified transactions for testing, provided this list to KUCR, and requested
documentation to support each transaction. We reviewed the supporting documentation provided
by KUCR and evaluated the allowability, allocability, and reasonableness of each transaction.
When necessary, we requested additional supporting documentation, reviewed it, and obtained
explanations and justifications from knowledgeable personnel until we had sufficient support to
assess the allowability, allocability, and reasonableness of each transaction. Our work required us
to rely on the computer-processed data obtained from KUCR and NSF OIG. We assessed NSF's
computer-processed data and found it to be sufficiently reliable for the purposes of this audit.

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

   •   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 Research Terms and Conditions.




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Appendix C: Questioned Costs Summary by Award
                                                   Indirect          Total           Total
Award Number      Direct Costs    ITTC Fee          Costs          Questioned     Unsupported
Finding 1: Unreasonable Equipment
                        135,071            --                --         135,071               --
                         29,600            --                --          29,600               --
                          3,067            --            1,350            4,417               --
                          2,335            --              607            2,942               --
Finding 1 Total         170,073            --            1,957          172,030               --
Finding 2: Unreasonable Travel
                         25,670            --           12,065           37,735               --
                         11,485            --            5,053           16,538               --
                          7,247          507             3,412           11,166               --
                          6,890          482             3,391           10,763               --
                          2,274            --            1,047            3,321               --
                          3,284            --            1,445            4,729               --
                          1,778            --              818            2,596               --
                          1,530            --                --           1,530               --
                            861            --              396            1,257               --
                            551            --              270              821               --
                            561            --              261              822               --
                            131             9               66              206               --
Finding 2 Total          62,262          998            28,224           91,484               --
Finding 3: Inadequate Documentation and Unallowable Participant Support
                         42,054            --                 --         42,054         14,055
Finding 3 Total          42,054            --                 --         42,054         14,055
Finding 4: Improper ACM$ Request
                         13,047            --                 --         13,047               --
Finding 4 Total          13,047            --                 --         13,047               --
Finding 5: Unreasonable or Unallowable Transactions
                          4,770            --            2,218            6,988               --
                          1,264            --              586            1,850               --
Finding 5 Total           6,034            --            2,804            8,838               --
Finding 6: Purchases before Award Effective Date
                          1,015           71               510            1,596               --
Finding 6 Total     $     1,015      $    71        $      510      $     1,596               --




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