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                                                        NATIONAL
                                                         OFFICE OF SCIENCE
                                                                   INSPECTOR
                                                                           FOUNDATION
                                                                             GENERAL
                                                           OFFICE OF INVESTIGATIONS
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                                                CLOSEOUT MEMORANDUM
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Case Number: 1-04010002                                                                               Page 1 b f 1
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         T h ~ sinvestigation was predicated upon receipt of information from an NSF contractor1that one of its
         subcontractors2 had reported accounting irregularities and as a result removed two employees from their
         positions w~ththe company.                                                                          11

         NSF-OIG Aud~tawarded a contract to an Independent Public Accounting (IPA) firm to conduct an Audit               I
         Survey and Internal Control Assessment Attestation Review of the subcontractor's billing records, (I
         specifically the reported accounting irregularities. The IPA firm's draft Notice of Findings confirmed earlier
         reports regarding the embezzlement, totaling $175,000 U.S. Dollars (USD). The IPA firm further reported
         that only $7,200 USD of the total loss was attributed to NSF funds. The IPA firm's report indicatedithat the
         embezzlement scheme, committed by the subcontractor's employees, occurred during the period January
         2002-May 2003 and was uncovered when a vendor complained of receiving only partial payments.li

         The subcontractor responded to the complaint timely and appropriately by conducting a thorough 11
         examination of various vendors related accounting records. Upon identifying the embezzlement arid
         determining culpability, the two employees were subsequently terminated from employment and referred
         to the government3authorities for prosecution.                                                  I

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         Both employees pled guilty to the embezzlement of funds and are pending sentencing where they are
         facing up to five years incarceration. All of the embezzled funds, to include the $7,200 USD of NSF funds,
         have been promptly restored to the appropriate accounts by the subcontractor.                     11


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                    Accordingly, this case is closed.

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NSF OIG Form 2 (1 1/02)                                                                                       11

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