oversight

Grant Fraud

Published by the National Science Foundation, Office of Inspector General on 2003-03-17.

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

K
                                         II
                                                 NATIONAL SCIENCE FOUNQATION
                                                  OFFICE OF INSPECTOR GENERAL
                                        Il          OFFICE OF INVESTIGATIONS




                                                                           --
                                        I     CLOSEOUT MEMORANDUM
                                        I1
L                                                                                                                   !

    Case Number: I01060013              "                                                    Page 1 of 2



         In June 200 1, we received allegations that NSF grant funds at the
                  had been misappropriated to cover expenses unrelated to the grant. Former officials
         from the        made 'kllegations of fraud but were unable to provide exact details of how grant
         funds were misused. Three         grants to       were identified and the office contracted with
                     to conducf an audit of the NSF grants.

         We referred the issue to the Offce of Audit in August 2001. In January 2002,


                                              a
         conducted a two-week site visit in an attempt to audit claimed cost on the three grants. Between
         September 1997 and August 2000,            claimed cost totaling $1.1 million o n b e three NSF
         grants. During the au'ilit,           found that         used 4 different accounting systems
         between 1997-2000 and there were many gaps in the accounting records.                    questioned
         $221,757 of the $232,396 tested cost because of a lack of internal controls and procedures to
         account for grant related expenses.
                                   I1
         In November 2002, we reviewed                               papers and determined that while
         there are indications that fraud                    ,we found no evidence of a specific scheme
         to embezzle NSF grant funds. However, the auditors did not review expenditures from June
         1999 to July 2000 because the electronic accounting system failed and expenditures were tracked
         on Excel spreadsheet;. The              working papers identified that        claimed $43,000
         more for SalariesNages than was budgeted for grant                  . The allegations originally
         received by this ofice claimed that administrators at          were diverting funds away from
         NSF grants.
                               /I
         We conducted a site-visit at        in February 2003 and reviewed selected expenditures charged
         to grant                from July 1999 to July 2000. We reviewed $170,000 in salary and
         consulting payments'charged to the NSF grant and found only three payments totaling $439.98
         that        was unable to find documentation or testimony to support the payments. These
         payments were made to two students who were later identified as employees a t , but were
         not participants in th&project supported by the grant.
                              I1
         The current President of the         stated that she arrived in September 2002 and found that the
                 staff lacked ahcounting and management experience. She also found the           was
         behind on the A- 133I audits by 2 years and that past management had taken no corrective action
         on previous audit reports that detailed management and accounting deficiencies. The President
         has hired a new business and management team that are building an infrastructure to track and
         account for all expenditures. While the business and administrative practices previously in place



                                                                                          NSF OIG Form 2 (1 1/02)
                                             NATIONAL SCIENCE FOUNDATION
                                              OFFICE OF INSPECTOR GENERAL
                                                OFFICE OF INVESTIGATIONS

                                         CLOSEOUT MEMORANDUM

Case Number: I01060013
                                                                           11           Page 2 of 2




           I
                            Il
     at the        were questionable, the NSF Program Officer was pleased with the results obtained
     by the        under the! grant and current        management is addressing the accounting
     deficiencies. Overall, we did not frnd a pattern of diversion or misuse of grant funds to support
     the allegations that NSF funds were diverted from their intended purpose or that NSF funds were
     fraudulently expended.

     Accordingly, this case is closed.