Grant Fraud

Published by the National Science Foundation, Office of Inspector General on 1999-02-26.

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

Date:          February 26, 1999

To:            File #I98040010



Re:            Case Closeo


match portion of an Appalachian Regional Commission (ARC) award (                      .
Upon receipt of this report, our office contacted a representative from Cotton & Company to
obtain further information about this matter. We were informed that Cotton & Company
believedihat the equipment,                                                    as charged to both
the NSF laward and the ARC3ant Eatch. While Catfane-C&     -                    to verifj that the
lathe was charged to the NSF award, they were not able to determine conclusively that it was
charged to the ARC match. It appeared from the accounting records thaF a l l y posted
the lathe charges to the ARC match account, later transferred them into the SF award account
and then transferred them back to the ARC match accouqt. However, althou
representatives did state that the equipment was reported as an expenditure on e ARC match,

F       ever provided Cotton & Company with a list of ebuipment charged to the ARC grant or
  e ARC match and Cotton & Company was not able to verify that the cost of the lathe was
included in the -ant/match          total.

On March 30, 1998 the audit report was referred to the NSF Office of Contracts, Policy &
oversight (CPO) for audit resolution. We requested that CPO refrain from resolving the lathe
machine issue and informf          this request. In the yeantime, we obtained expenditure
information for the ARC award from the U.S. Department of Education (the h d s for the award

federal share." The final expenditure report indicated that ARC spent a total of $606,808 --
$300,0b0 ARC funds and $306,808 match funds, but the only document provided in support of
the final claimed expenditures was an itemized equipment list. This same list had previously
been provided to Cotton & Company and was only a revised budget, not a schedule of actual
                                        eces of equipment described as
Both the ~ e ~ a r t r n eof
                          n tEducation OIG and the Appalachian Regional Commission OIG
declined to join us in pursuing this matter but requested thatitweupdate them on our findings.
The Appalachian Regional Commission OIG W e r stated that were this matter referred to ARC
management, they would not attempt to recover the funds.


We visited the--Beam                                                   if and why the lathe had
been charged to both the NSF grant and the ARC match. We were informed -b
management that the lathe had been charged to both accounts and that?as         permitted to do
so by the ARC itself, as indicated by the Catalogue of Fedlral Domestic ssistance description
of.the ARC program under which the award was made. D G n g our site visit we observed the
m i s e s and examined the lathe. We found no indication that grant funds were being

                      claim that it was permitted to use federal funds to meet their ARC match
and conclude           C does have the authority to         organizations to use other federal
funding to meet ARC match requirements. No significani findings or fraud, waste or abuse are
found. The case is closed.