Semiannual Report - March 1995

Published by the National Science Foundation, Office of Inspector General on 1995-03-01.

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

Title  : OIG12  Number 12--NSF OIG Semiannual Report to the Congress
Type   : Report
Date   : August 7, 1995
File   : oig12

Semiannual Report to the Congress

Number 12

October 1, 1994-March 31, 1995

Office of Inspector General
National Science Foundation


This report describes our activities and accomplishments for the
first half of FY 1995.  Section 5 of the Inspector General Act of
1978, as amended, requires that the National Science Board transmit
this report to the Congress within 30 days of its receipt along
with any comments the Board may wish to make.

We completed our first on-site review of NSF's management and
operations of the United States Antarctic Program.  We reviewed
logistical operations in Colorado; California; Christchurch, New
Zealand; and at McMurdo and South Pole stations on the Antarctic
continent.  We completed our fourth audit of NSF's donations
account financial statements, as required by the Chief Financial
Officers Act, and continued to prepare to audit all of the
Foundation's financial statements in FY 1996.

We would like to welcome seven new members to the National Science
Board.  Four of the new members have been assigned to the Board's
Committee on Audit and Oversight, which provides general
supervision of OIG activities.  We look forward to working with the
Board and NSF management to advance NSF's goals in the coming

Linda G. Sundro
Inspector General
April 30, 1995



We reviewed logistical operations that support NSF's Antarctic
program because this area has the greatest potential for cost
savings.  Although we were generally impressed with operations in
Antarctica, we made several recommendations for significant cost
savings and improved efficiency or safety.  NSF is reviewing our
findings and recommendations.

The Chief Financial Officers (CFO) Act of 1990 and the Government
Management Reform Act of 1994 require that we increase the scope of
our annual internal audit of NSF's financial operations.  The Acts
require that, beginning in FY 1996, we annually audit agency-wide
financial statements.  This is the first time all of NSF's accounts
will be audited.  OIG personnel and funds previously designated for
internal discretionary reviews will be used to conduct the audit of
the agency-wide financial statements.  In addition, we must realign
other audit staff resources and obtain additional funds to contract
for services from certified public accounting firms.

In 62 audits of NSF awards, we questioned approximately $4.7
million in costs and recommended better uses for about $10 million.

NSF agreed to implement recommendations, which will result in
savings of over $5 million in future awards to a supercomputer


Individuals employed under the Intergovernmental Personnel Act
(IPA) are not covered by the standards of conduct that apply to
career civil servants.  We recommended that NSF devise a means of
enforcing comparable standards of ethical conduct for IPAs.


A Principal Investigator (PI) fraudulently diverted federal funds
to his personal account.  The PI was sentenced to 5 years'
probation, ordered to perform 500 hours of community service, and
ordered to pay restitution.

We continue to conduct investigations involving fraud in the Small
Business Innovation Research (SBIR) program.  As a result of our
recommendations in previous semiannual reports, the General
Accounting Office (GAO) reviewed the issue of duplicate funding for
SBIR awards.  GAO agreed with our conclusion that the information
available on government-wide SBIR awards is not adequate.

In this reporting period, investigative recoveries totaled


NSF's Deputy Director resolved three cases involving misconduct
that we had referred to her for adjudication.  These cases involved
a funding request for research that was already completed,
plagiarism, and a violation of confidential peer review.

We recommended that the Deputy Director find misconduct in four new
cases.  These cases involved plagiarism and misrepresentation of
publications and academic credentials.


This report contains an analysis of common findings from our first
12 inspections.  In this period, we inspected NSF awards at a state
university; a private, technical institute; and two primarily
undergraduate institutions.
















ASA            Antarctic Support Associates

ASC            Advanced Scientific Computing

CFO            Chief Financial Officer

COAS           College of Oceanic and Atmospheric Sciences

CPO            Division of Contracts, Policy, and Oversight

EHR            Division of Education and Human Resources

FAS            Financial Accounting System

GAO            General Accounting Office

GEO            Directorate for Geosciences

GRFP           Graduate Research Fellowship Program

HHS            Department of Health and Human Services

ILI            Instrumentation and Laboratory Improvement

IPAs           Scientists Employed Under the
               Intergovernmental Personnel Act

OMB            Office of Management and Budget

OPP            Office of Polar Programs

PI             Principal Investigator

SBA            Small Business Administration

SBIR           Small Business Innovation Research

USAP           United States Antarctic Program


The table cross-references the reporting requirements prescribed by
the Inspector General Act of 1978, as amended, to the specific
pages in the report where they are addressed.


Section 4(a)(2)          Review of Legislation and Regulation

Section 5(a)(1)          Significant Problems, Abuses, and

Section 5(a)(2)          Recommendations With Respect to
                         Significant Problems, Abuses, and

Section 5(a)(3)          Prior Significant Recommendations on Which
                         Corrective Action Has Not Been Completed

Section 5(a)(4)          Matters Referred to Prosecutive

Section 5(a)(5)          Summary of Instances Where Information Was

Section 5(a)(6)          List of Audit Reports

Section 5(a)(7)          Summary of Each Particularly Significant

Section 5(a)(8)          Statistical Table Showing Number of
                         Reports and Dollar Value of Questioned

Section 5(a)(9)          Statistical Table Showing Number of
                         Reports and Dollar Value of
                         Recommendations That Funds Be Put to
                         Better Use

Section 5(a)(10)         Summary of Each Audit Issued Before This
                         Reporting Period for Which No Management
                         Decision Was Made by the End of the
                         Reporting Period

Section 5(a)(11)         Significant Revised Management Decisions

Section 5(a)(12)         Significant Management Decisions With
                         Which the Inspector General Disagrees


The Office of Audit is responsible for auditing grants, contracts,
and cooperative agreements funded by NSF's programs and operations
and for ensuring that financial, administrative, and program
aspects of those activities are reviewed.  The Office evaluates
internal controls, reviews data processing systems, and follows up
on the implementation of recommendations included in audit reports.
In addition, the Office assists in the financial, internal
control, and compliance portions of OIG inspections.

All audit reports are referred to NSF management for action or
information.  The Office of Audit advises and assists NSF in
resolving audit recommendations.  The Office also acts as a liaison
between NSF and audit groups from the private sector and other
federal agencies by arranging for special reviews, obtaining
information, and providing technical advice.  The Office of Audit
provides speakers and staff assistance at seminars and courses
sponsored by NSF and other federal agencies and at related
professional and scientific meetings.


NSF manages and operates the United States Antarctic Program
(USAP). In FY 1995, NSF will spend $195 million to support research
in Antarctica. To support Antarctic research, NSF operates three
stations year-round: McMurdo, the South Pole, and Palmer stations.
Each station is akin to a small town, where NSF provides everything
from housing to recreational facilities for researchers and support
personnel. During the austral summer, which is when most of the
research operations in Antarctica are conducted, there are about
1,200 people at all 3 stations. These stations operate with reduced
populations during the austral winter.

To operate the USAP, NSF must comply with many U.S. and foreign
laws as well as international treaties. These laws affect USAP's
operations within Antarctica and the transportation of supplies and
people to and from Antarctica.  Everything from transporting common
household waste to contact with Antarctic animals is regulated.

It takes about 30 hours to fly from Washington, D.C., to McMurdo
station, and travel to the other two stations takes longer. Because
Antarctica is so remote, it is difficult to conduct routine audits
and reviews to ensure that program objectives are being met and
program funds are properly managed. The difficulty of providing
routine audit coverage combined with the large dollar amount and
high visibility of USAP were factors that contributed to our
decision to identify USAP as a focus area in our strategic plan.

There are many issues unique to Antarctica that are relevant to our
oversight of USAP.  These issues include the environment, safety
and search-and-rescue operations, international issues, tourism,
personnel issues, and logistics.  We decided to focus our current
reviews on USAP's logistical operations because cost savings
associated with the program's logistics presented the greatest
potential for us to have a positive effect on the program's
scientific objectives. For example, in FY 1995, NSF will spend over
$160 million on logistical support and $29 million on science.  A
portion of the logistics budget directly supports research, such as
by providing travel and field support.

Nonetheless, it is clear that a relatively small cost savings in
logistics could allow a relatively large increase in the Antarctic
science research budget.

Most logistical support is provided through a contract with
Antarctic Support Associates (ASA) and cost-reimbursable services
from the Navy. NSF's Office of Polar Programs (OPP) coordinates
logistics between ASA and the Navy and is responsible for
maximizing efficiency and safety and minimizing duplication of

In this reporting period, we visited logistical operations in
Christchurch, New Zealand, and at the McMurdo and South Pole
stations in Antarctica. We were generally impressed with USAP's
operations. However, we made several recommendations that we
believe will lead to cost savings or improved efficiency or safety.
NSF and ASA are reviewing our findings and recommendations, which
are summarized below. We will discuss NSF's responses in our next
semiannual report.

Issues Involving Significant
Cost Savings

     Vacant Buildings and Hotel Costs. The Navy leases land in
Christchurch, New Zealand, for its Antarctic operations. Some of
the buildings on this land were formerly Navy barracks and are
currently empty. These vacant barracks are not up to the Navy's
standards for overnight accommodation. To house its personnel, the
Navy leases 110 hotel rooms where it houses up to 220 people per
night.  USAP pays about $950,000 over a 5-month period ($190,000
per month) to lease these rooms.

The Navy has obtained estimates of about $544,000 from contractors
in New Zealand to renovate the barracks that is in the best
condition. The renovated barracks would house 80 people and would
obviate the need for 40 hotel rooms, which cost $368,640 per
5-month season. NSF could also pay reduced meal per diem to Navy
personnel living in the barracks for a savings of $519,440 per
season. The Navy estimates that the annual cost of operating a
barracks is $10,000 to $30,000. Using this estimate, the
$544,000-renovation cost would be recouped during the first year,
with over $300,000 in additional savings.  USAP could also forego
an estimated annual cost of over $800,000 (the cost of the hotel
rooms and the higher meal per diem minus the cost of maintaining
the barracks) in every year thereafter. According to Navy
personnel, the useful life of the renovated barracks would be about
15 years. Over a 15-year period, USAP could save over $13 million
if it used the barracks rather than hotel rooms. Using a 6-percent
interest rate, we estimate that the present value of the savings
would be about $7.8 million.

It seems possible that the Air Force will assume logistical support
of USAP in the near future. Under NSF's plan to phase out naval
support, some current Navy responsibilities would be contracted-out
to New Zealand firms, and fewer military personnel would be lodged
in Christchurch. Even so, ASA and NSF personnel and scientists
traveling to Antarctica through Christchurch could stay in the
barracks. Under this scenario, the net present value of the cost
savings would be about $4 million.

We recommended that NSF provide the funds to renovate the barracks
and use the cost savings to make more funds available for research
in the years following the renovation.

     Fuel Charges.  USAP distributes jet and heating fuel to
several entities in the Antarctic.  NSF bills the Italian, New
Zealand, and Russian research programs for the fuel it provides for
their planes and facilities in Antarctica. We believe USAP should
recover all associated costs for the fuel it sells to other
nations. Associated costs include storage, transportation,
maintenance of fuel lines and tanks, and related overhead costs. We
estimate that if NSF bills these costs to the Italian, New Zealand,
and Russian research programs, it will recoup about $115,000 per

For accounting purposes, NSF allocates fuel charges to the entity
that operates the aircraft fueled--either the Navy or the Air
Force--to ensure that the costs of flying the aircraft are
accurately reflected in USAP's records. We recommended that all
associated fuel costs be proportionately allocated to the entity
using the fuel.

Other Areas for Improvement

The following findings will not result in significant cost savings;
however, we believe they will improve the overall management of
Antarctic operations.

     Reporting Nonpermitted Releases. The Antarctic environment is
very fragile.  To help keep the Antarctic pristine, NSF strictly
controls the release of laboratory chemicals, fuel, and oil. ASA is
required to report to NSF's Director all "nonpermitted"
(accidental) releases of foreign substances into the Antarctic
environment that involve ASA and scientific personnel. Our reviews
indicated that, while reports of nonpermitted releases involving
administrative personnel seem to have been made routinely,
scientific personnel may not be reporting all accidental releases
for which they are responsible. We recommended that NSF educate
scientific personnel on the need for reporting nonpermitted
releases and require that ASA periodically verify that no releases
have occurred at field sites where research is being conducted.

     Sewage Treatment.   Sewage from McMurdo station is not
chemically treated before it is discharged into McMurdo Sound. We
recommended that NSF assess the costs and benefits of treating
sewage before its release and, if appropriate, promptly implement
a treatment program.

     Graywater.  Water is a valuable commodity in the Antarctic, so
water conservation is considered an important part of ASA's
management. At the South Pole, the elevated dorm uses "graywater"
from showers and sinks to flush the toilets. We recommended that
ASA formally consider using graywater in all new buildings
constructed in the Antarctic.  The increased use of graywater would
reduce the desalination plant's fuel needs and operational

     Toilet Facilities on USAP Airplanes.   The flight from
Christchurch to McMurdo station is about 8 hours. NSF's airplanes
have primitive toilet facilities with minimal privacy. In a June
1988 report, the USAP Safety Review Panel recognized this as a
problem because some people, particularly women, avoid drinking
before the flight so they will not have to use the toilet. This
practice can result in dehydration and present a health hazard. The
percentage of women involved in USAP has increased to almost 30
percent of total staff.  NSF has spent about $44.5 million since
1990 to redesign five of its seven aircraft. Nonetheless, NSF has
not taken any action to improve the adequacy of the toilet

We recommended that NSF ensure that all USAP airplanes have toilet
facilities that afford basic privacy for those who use them.

     Automated Systems.   ASA is using automated purchasing and
inventory systems at its Denver headquarters and at most of the
work units at the McMurdo and South Pole stations. In Christchurch,
we found these automated systems were not fully implemented, which
resulted in some duplication of effort. This duplication could be
avoided by modifying the existing software or installing new
software. We recommended that ASA modify its software in
Christchurch to correct this problem.

     South Pole Medical Services.   Although there is a physician
stationed at the South Pole, there is no one else there who is
qualified to administer medical treatment. We recommended that NSF
ensure there is at least one other person who is, at minimum,
qualified as an Emergency Medical Technician to handle problems if
the physician is incapacitated.

Financial Audits Document
Efficient Management

In addition to our reviews of USAP's logistical operations, we
conducted two financial audits involving USAP. One of these audits
involved a research facility at the South Pole, and the other
involved an ecological research site near McMurdo station. Our
reviews gave us renewed confidence in the financial management of
these parts of NSF's Antarctic program.

     Science and Technology Center.   The objectives of NSF's
Science and Technology Center program are to develop opportunities
in science that may entail multidisciplinary research or research
within a single scientific discipline; involve students and
researchers in developing applications for scientific discoveries
and transferring that knowledge between the university community
and industry; and provide stable, long-term funding for continued
research in science and technology.

NSF awarded an $11,034,885 cooperative agreement to a large,
midwestern university to establish a Science and Technology Center
with an observation site at the South Pole. The site's research
facilities use the South Pole's unique atmospheric conditions to
observe the universe. We found the university was effectively
administering this award; however, we questioned $7,386 and
identified some procedural problems. We questioned $2,590 because
the center charged a dental procedure to the award and $4,796
because the center's claims of cost sharing were unsupported. We
also found that the university's procedures for documenting the
efforts of center personnel for the purposes of cost sharing were
inadequate. We found that the center failed to submit overdue final
project reports, adopt screening procedures to avoid unnecessary
procurements, take advantage of available purchase discounts, and
obtain prior written authorization for travel.

     Ecological Research Site.   NSF awarded $1,151,393 to a
research institute to establish a Long-Term Ecological Research
site in the Dry Valleys near McMurdo station in Antarctica. The
institute will use environmental data collection, long-term
experiments, and model development to study the integration of the
biological processes within the lakes, streams, and ecosystems in
an area of the Dry Valleys. We conducted a survey of the
institute's financial system, and, based on the results of that
survey, we concluded that the institute was properly accounting for
financial expenditures.



A cost resulting from an alleged violation of law, regulation, or
the terms and conditions of the grant, cooperative agreement, or
other document governing the expenditure of funds.  A cost can also
be "questioned" because it is not supported by adequate
documentation or because funds have been used for a purpose that
appears to be unnecessary.


Management's Response To Previous
Recommendations Regarding USAP's
Procurement and Supply System

In Semiannual Report Number 11 (page 9), we described our review of
ASA's procurement and supply system. We provided our report to ASA;
NSF's OPP; and NSF's Division of Contracts, Policy, and Oversight
(CPO).  As a result of our recommendations:

          NSF will continue working with ASA to improve
          the process for procuring high-cost items. ASA
          is working toward implementing a simplified
          purchase requisition process for small

          NSF will carefully analyze ASA's subcontracts
          before approving them and will identify
          subcontracts to companies affiliated with ASA
          for increased oversight.

          ASA will improve its documentation of
          decisions to award subcontracts, particularly
          those awarded to ASA affiliates. NSF  and ASA
          have agreed that ASA will competitively award
          subcontracts for a number of functions that
          were previously performed by ASA employees or
          affiliated companies.

          CPO is considering ways of shortening the procurement
          process; however, it was uncertain whether the process
          could be shortened without adversely affecting NSF's
          interests. OPP stated that it will work with ASA to
          decrease the number of "eleventh hour" procurements. In
          addition, NSF and ASA are collecting data on last-minute
          procurements to identify recurring problems so that
          procedures can be implemented to ensure maximum

          ASA has implemented several controls to minimize
          duplicate procurements. ASA is also developing a computer
          program that will interface with the existing automated
          systems to ensure that items are returned or otherwise
          accounted for when they are to be returned to storage.


We review NSF's financial and administrative activities and
evaluate NSF's policies and procedures to ensure that:

          NSF is complying with federal laws and regulations;

          the Foundation's financial and accounting
          policies and procedures are adequate to
          maintain the financial accounting system (FAS)
          and produce accurate financial accounting
          statements; and

          internal controls are in place to prevent
          and/or detect fraud, waste, and abuse.

We have always conducted statutory and discretionary reviews of
NSF's financial operations. Statutory reviews are required by law
and must be performed within specified time constraints.
Discretionary reviews are performed if resources are available and
if we identify programs that appear vulnerable.

Current Chief Financial
Officers Audit Requirement

The Chief Financial Officers (CFO) Act of 1990 and the Government
Management Reform Act of 1994 require that we increase the scope of
our annual internal audit of NSF's financial operations. The CFO
Act currently requires that we conduct an annual audit of our
Donations Account financial statements. The Donations Account
represents less than 1.5 percent of NSF's approximate $3-billion

While auditing the Donations Account financial statements,  we
perform tests to ensure that adequate controls exist in the FAS as
well as in the cash receipts, cash disbursement, and financial
statement compilation processes.

Expanded CFO
Audit Requirement

The Government Management Reform Act requires that, beginning in FY
1996, we audit agency-wide financial statements by March 1
following each fiscal year. An audit of all of NSF's accounts has
never been conducted in the Foundation's 45-year history. Our
expanded audit requirement will increase our scope to include
general ledger maintenance and control; grantee cash management;
grant and contract administration; plant, property, and equipment
control; payroll; and the budget process.

OIG personnel and funds previously designated for internal
discretionary reviews will be used to conduct the audit of the
agency-wide financial statements. In addition, we must realign
other audit staff resources and obtain additional funds to contract
for services from certified public accounting firms.

We are reducing our audit coverage of NSF's internal operations
when not required to do so by statute. For instance, FY 1994 was
the first year that we were not statutorily required to review
consulting advisory services that NSF obtains by contract. Because
of other internal audit priorities, we did not conduct an audit in
that area. In addition, at NSF management's request, we previously
audited financial statements for the Ocean Drilling Project.
Because our internal audit resources are so strained, we advised
Ocean Drilling Project management that it will have to reimburse us
for our audit costs if we are to continue providing this service.

CFO Audit Activities
for FYs 1995 and 1996

To comply with the CFO and Government Management Reform Acts'
expanded requirements, we are preparing for the FY 1996 agency-wide
financial statement audit. In this reporting period, we:

          completed our audit of NSF's 1994 Donations
          Account financial statements;

          completed initial reviews of NSF's general
          ledger, electronic data processing controls,
          and property controls;

          met with the National Science Board and NSF
          management to discuss the FY 1996 audit
          financing; and

          continued planning to procure contracted
          certified public accountant services for the
          FY 1996 financial statement audit.

In February 1995, the National Science Board's Committee on Audit
and Oversight decided to limit FY 1996 CFO audit expenditures to
$500,000. Half of these funds will be provided by our
appropriation, and the other half will be assessed from the
accounts audited. It is too soon for us to know how this strategy
will affect the ratio of contract audit support to staff auditors
or how thoroughly NSF's FY 1996 financial statements can be

We will be learning more about the most effective ways of designing
the CFO audit program in FYs 1996 and 1997 after NSF's CFO has
assembled the statements.

Audit Results for
Current Reporting Period

The results of audits completed during this reporting period are
described below. NSF generally agreed with our recommendations.

     Audit of NSF's Donations Account Financial Statements.  We
audited NSF's 1994 Donations Account (Trust Fund) Financial
Statements and issued Auditor's Reports on Principal Statements,
Internal Control, and Compliance. We provided an unqualified
opinion on the Principal Statements, Notes, and Schedules after
management corrected minor errors. We also provided an unqualified
opinion on Compliance.

We issued a qualified opinion on Internal Control because NSF did
not have adequate controls established for collecting and reporting
performance data. To compensate for this lack of control, we
expanded our audit's scope to conduct a more detailed review of the
supporting documentation and to verify all of the performance data
in the financial statements. We identified a $200,000 contribution
that was included in NSF's performance data but was never actually
sent by the contributing company.  We advised management of the
situation, and NSF obtained the $200,000 from the contributing

     Review of Electronic Data Processing Controls in the FAS. NSF
uses an automated FAS to record all of its financial transactions.
Financial statements are based on the sum of the transactions in
NSF's general ledger. In this reporting period, we completed one of
several planned reviews of the Electronic Data Processing controls
in the FAS.

We reviewed NSF's User Profile System, which was designed to
provide security for access to the FAS database. We determined that
NSF's control procedures were adequate to prevent unauthorized
access to the FAS. However, some of the data on specific users were
incorrect or outdated. We made recommendations to correct the user
data and properly maintain the User Profile System.

We also reviewed the most recent FAS database maintenance project,
which was designed to streamline the active database files and
improve overall system performance. The project was well
coordinated, and it successfully reduced the active database file
by 5.8 million financial records.

Finally, we reviewed the electronic edits of data input into the
FAS. The edits effectively verified the accuracy of data. However,
discrepancies in the error message definitions existed that could
confuse the users entering data into the system.  We made
recommendations to correct those definitions.

     Review of Property Controls.   Property is a highly vulnerable
asset within any agency or organization. As of August 1994, over
$18 million in property was recorded in NSF's general ledger.
During our review of personal computers and related equipment, we
found that NSF had not adequately maintained property records;
physically inventoried equipment; or annually reconciled property
records, as prescribed in NSF's policies and procedures. As a
result, there were discrepancies between the general ledger
balances, the property management system, and subsidiary property
records maintained by property custodians in each office.

We recommended that NSF management conduct a complete inventory,
reconcile all NSF property, and update the property files to
reflect correct account balances and inventory descriptions;
provide additional guidance and training for property custodians;
and implement internal controls to ensure that the property
management system is properly maintained.

     Review of the General Ledger.   We reviewed NSF's general
ledger and compared it to the U.S. Standard General Ledger
prescribed by the U.S. Department of Treasury and used by all
federal agencies.  In most instances, NSF's general ledger complied
with the U.S. Standard General Ledger. We reported all of the
inconsistencies we found to NSF management for further review and


The following summaries describe other significant audits of NSF
grants, contracts, or cooperative agreements.

Division of Advanced Scientific
Computing Could Save NSF Funds

Supercomputer centers provide for the advancement of scientific
research and enhance U.S. industrial competitiveness. NSF's
Division of Advanced Scientific Computing (ASC) awarded a
$74.7-million cooperative agreement to a large, commercial company
to operate one of NSF's four supercomputer centers. Of that amount,
the company claimed $60.9 million. The National Science Board has
approved a 2-year extension of the cooperative agreement at
approximately $32 million. At the end of the 2-year extension, the
center will either be phased out over a 1-year period or continue
to operate under a new 5-year award. The Board's decision ensures
that the center will continue to operate for at least 3 more years
and for as many as 7 more years. The results of our review of the
company's administration of the cooperative agreement follow.

     Future Savings.   We estimate that ASC could save $5.5 million
over the next 3 years. If the cooperative agreement is extended for
7 years, we estimate that ASC could save $12.8 million. Below are
examples of how these savings could be achieved.

          ASC had been paying about $1.3 million per
          year to purchase the building that houses the
          supercomputer center. As of May 31, 1995, the
          loan will be fully paid.  We believe ASC can
          reduce annual award payments by about $1.3
          million per year without reducing the research

          The company claimed $1.7 million in
          independent research and development costs for
          the 44-month period covered by the audit
          (about $470,000 per year).  NSF does not
          typically pay independent research and
          development costs.  In Grant Policy Manual
          Transmittal Memorandum No. 8 (February 25,
          1994), NSF explained that funding independent
          research and development circumvents NSF's
          peer review process by supporting research
          that has not been peer reviewed. As a result,
          we recommended that the company reduce the
          amount of the extension by $470,000 per year.
          In our opinion, this reduction will not have
          an adverse effect on the activities conducted
          under the cooperative agreement.

          The company charged $1.5 million in operating
          costs to the cooperative agreement even though
          it used the supercomputer center to perform
          other grant and contract work. ASC would save
          about $50,000 per year if it instructed the
          company to allocate the operating costs
          proportionally to all projects performed at
          the center.

          Because title to equipment purchased under the
          cooperative agreement vests in the university
          instead of the government, the company pays
          state sales tax on equipment purchased with
          federal funds. As a result, the government
          paid over $400,000 in sales tax during the
          44-month audit period. ASC is planning to
          spend $1 million to upgrade the computer
          memory at the center.  Given the 8.5-percent
          state sales tax, ASC will pay approximately
          $85,000 in sales tax. However, ASC would save
          that amount if the cooperative agreement were
          amended to vest title in the government.

ASC generally agreed with our recommendations except for the sales
tax issue, which ASC is still studying.

     Unallowable and Unsupported Costs.   We questioned $2,933,428
because we found unallowable ($1,877,794) and unsupported
($1,055,634) costs. Examples of these costs follow.

          Of the unallowable costs, $1,726,773, was for independent
          research and development, which, as discussed above, is
          not typically an allowable cost for NSF awards.

          The company overran its budget from the previous
          cooperative agreement even though NSF provided the
          company all of the funds in the award budget. As a
          result, the company carried forward $1,055,634 in costs
          from the previous cooperative agreement and charged those
          costs to the current award. Because the company could not
          explain why it claimed those costs, we questioned the
          amount that was carried forward.

          The company billed NSF a rate of pay that exceeded the
          allowed rate. We estimate that consultant rates exceeded
          the amount allowed by $25,000 for all consultant charges.
          We are reviewing the company's documentation of payments
          to consultants to determine the actual amount overpaid.

The company agreed that consultants were paid above allowable rates
but disagreed with all other questioned costs.

     Inadequate Accounting System.   Under the cooperative
agreement, NSF provided funds for the supercomputer center's
general management and operation. Funds for specific activities
were provided by a state, a university, commercial companies, and
25 NSF grants. The company combined all of these funds in a single
account. Thus, there was about $84 million in the account; NSF
provided about $61 million of that amount. Cost accounting
standards, as well as good accounting practices, require that costs
associated with specific program objectives be accounted for

As a result of the company combining funds in one account, NSF had
no assurance that the company properly used NSF funds, and we could
not verify the company's responses to several of our

NSF management will resolve the questioned costs and audit
recommendations during the audit resolution process. We will
continue to monitor this matter and describe NSF's final actions in
our next semiannual report.

Audit of Nonprofit Institution Reveals
Improper Expenditures and Inadequate Internal Controls

In Semiannual Report Number 11 (page 22), we discussed an
investigation related to an NSF award to an education association.
The NSF award and a related Department of Education award supported
a national reform of secondary school science education programs.
The investigation revealed a conflict of interest and fraud by one
of the association's senior officials.  The senior official
resigned from the association, but the Department of Justice is
still reviewing his actions.

In coordination with the criminal investigation, we conducted an
audit of the 14 education awards that NSF awarded to the
association. The association's management of 13 of the 14 awards
was generally acceptable.  However, we questioned $173,408 related
to the remaining award, which was for an education reform project.
The questioned costs were due to irregularities in the practices of
one of the association's senior officials and internal control

These irregularities and weaknesses created an environment in which
the official could engage, undetected, in a variety of questionable

          Of the $173,408, we questioned $57,092 because the costs
          were unsupported or improperly charged.  Unjustified
          travel expenses and personal expenses billed to the
          association's credit cards were often recharged to the
          federal project because the association did not require
          advance approval of travel or documentation of expenses
          incurred in travel vouchers prepared after travel.

          The association paid for the grant-related travel
          expenses of one of its senior officials with funds from
          the education reform project. The official also received
          reimbursements for the same travel expenses from the
          institutions he visited. He improperly retained these
          duplicate payments and deposited them into his personal
          bank accounts.

          We questioned $89,567 in payroll costs charged to the
          education reform project primarily because one senior
          official charged hours that he spent on personal business
          to the project. However, we found a broader pattern of
          timekeeping deficiencies at the association, including
          missing or late time sheets and failure to require time

          One of the association's senior officials received
          consulting and speaking fees and honorariums totaling
          $6,900 for conducting activities that were required of
          him under the federally funded project. Those fees and
          honorariums should have been treated as project income
          and used to further the project's objectives.

          We also questioned $185,020 charged to awards other than
          the education reform project. The association did not
          obtain NSF's approval to spend $102,640 that was
          designated as participant support costs in other
          categories. We also questioned indirect costs ($47,580)
          and fringe benefit costs ($22,390) because the
          association calculated them incorrectly.

The association agreed to refund $290,091 of the questioned costs,
including all costs that we questioned with respect to the
education reform project. We will refer the remaining $68,337 to
CPO for audit resolution. The association also agreed to improve
its documentation and approval of award-related travel and its
timekeeping system.

Nonprofit Company Claims
Unallowed and Unsupported Costs

NSF awarded a nonprofit company two grants totaling $1,122,409 to
teach elementary and high school minority students biology,
chemistry, engineering, and mathematics through after-school and
summer courses. The company claimed $973,372, and we questioned

          We questioned $219,840 because the company charged costs
          to NSF on the Federal Cash Transactions Report that it
          did not record on its accounting records.  At the time of
          our review, the accounting records were incomplete, and
          the fiscal officer could not justify charges to NSF.
          There was also $21,242 charged to NSF and recorded on the
          accounting records that was not supported by invoices or
          receipts. The company's management acknowledged that its
          prior accountant and accounting records were inadequate.
          At the time of our review, the company was implementing
          a new accounting system.

          We also questioned $53,120 in participant support costs
          that was budgeted to support minority students' costs to
          travel to science fairs and scientific programs as well
          as field trips to museums and engineering firms. The
          funds were actually used for salaries for teachers and
          administrative personnel, entertainment, materials and
          supplies, and meals at meetings attended by company
          employees. The company told us these errors occurred
          because it was not familiar with NSF's restrictions on
          participant support costs even though NSF had sent the
          company documentation that clearly described these

          The company did not comply with NSF's award letter, which
          stated that because "an amount for indirect costs has not
          been requested in the proposal or included in the amount
          awarded . . . indirect costs associated with this project
          will not be reimbursed by NSF." Although NSF decided it
          would not pay indirect costs on the award, the company
          had charged NSF $23,381 for charges usually treated as
          indirect costs, such as general purpose office equipment,
          supplies, telephone, travel, publication, and
          inappropriate costs.

          In the project proposal, the company requested, and the
          grant officer approved, the reimbursement of
          administrative (such as secretarial) salaries and fringe
          benefits as direct costs. Administrative salaries are
          usually charged as indirect costs because these employees
          work on multiple projects. We questioned $207,723 because
          salaries could not be readily identified with the
          NSF-funded project. We questioned all of these costs
          because the company did not maintain timecards showing
          how employees spent their time.

The grantee did not agree with our questioned costs.  However, the
company did agree to identify, support, and record costs in its
accounting system. NSF will finalize disallowed costs during audit

Continued Problems With Two Principal
Investigators From a Television Science Program

In 1990, we reviewed two grants totaling $2,255,496 that NSF
provided to a for-profit company owned by two principal
investigators (PIs), a married couple. At that time, the company
claimed $2,113,620, and we questioned $410,338. During this
reporting period, CPO resolved the costs questioned in the 1990

In 1992, the PIs submitted a new proposal to NSF. The PIs submitted
the proposal as employees of a nonprofit foundation. The proposal
was for the production of 10- to 15-minute films that provide
science teachers with improved instruction techniques for
elementary school children. NSF awarded the nonprofit foundation a
$2,711,043 grant. At the time of our audit, the grantee had claimed

When NSF issued the 1992 grant, it considered the 1990 report's
findings concerning the PIs and stated that the nonprofit
foundation could not request cash advances or receive indirect
costs that exceeded a specific rate.  However, the nonprofit
foundation requested and received excessive cash advances and
claimed indirect costs and reimbursement for certain items in such
a way that it exceeded the maximum indirect cost rate. We
recommended that NSF take steps to enforce the grant terms.

We also found that the PIs may claim excessive salaries under the
1992 grant. The nonprofit foundation's contractual agreements with
the PIs included clauses for bonus payments. The contract did not
specify the amount of, or limits on, the bonuses. We recommended
that NSF put a ceiling on the salaries and bonuses that can be paid
to the PIs.

We recommended that NSF recover $157, 870. The grantee disagreed
with our findings and recommendations. NSF management will resolve
these issues during the audit resolution process.

Follow Up of a University's
Internal Investigation

NSF awarded an $83,536 grant to a university to study the family
environment. A special review board investigated allegations of
misconduct by the PI and the improper use of NSF funds charged to
the grant. The review board concluded that the PI did not conduct
the research proposed in the grant or properly use grant funds.
Therefore, the special university review board recommended that we
review claimed costs. At the time of our audit, the university
claimed $66,753.

Based on the results of the special review board's investigation,
we requested additional information and found that the university
was at fault for some of the problems identified in its internal
investigation. We questioned $63,031 because salaries and fringe
benefits were related to work performed on other studies; costs
paid from a personal checking account were also used on other
studies and were not supported by documentation; equipment costs
were unrelated to the proposed study, and the equipment could not
be found on the university premises. University procedures allowed
the PI to request an advance of NSF funds to be set aside in a
personal checking account, but the university had no control over
the checking account. In addition, the PI used NSF funds to pay for
costs related to other studies; checks were made out to cash and
the PI; some participants were not paid; and the balance of the
account was not returned to NSF.

The university did not promptly notify NSF that the PI took a leave
of absence, and later resigned, from the university. We believe it
was important to notify NSF of the PI's leave of absence and
resignation because NSF's decision to support the grant was based
primarily on its evaluation of the PI's knowledge of the field of
study and her ability to conduct the research. The PI resigned from
the university before she completed the project. Consequently, the
university did not submit a final project report to NSF. We made
several recommendations to improve the university's compliance with
federal regulations and to strengthen the internal control
structure. The University was generally receptive to our findings
and recommendations.

Nonprofit Institution Has
Satisfactory Review

Since 1986, the government has contributed $11 million to a
nonprofit consortium to enhance the competitiveness of the U.S.
semiconductor industry. Government agencies provided NSF with over
$10 million, and NSF contributed the additional $1 million. NSF
issued two awards to the consortium. We conducted this review
because we are the federal oversight agency (cognizant agency) for
all of the federal funds under the awards.

The consortium includes more than 70 companies and federal
agencies.  Each year, the consortium provides $20 million in
research contracts to 60 universities and nonprofit institutions.
The consortium met the program's goals and most compliance
requirements.  However, the consortium did not:

          obtain an audit, as required by Office of Management and
          Budget (OMB) Circular A-133, "Audits of Institutions of
          Higher Education and Other Nonprofit Institutions";

          incorporate Equal Employment Opportunity clauses in

          have an accounting system that identified and segregated
          unallowable costs; and

          have complete written accounting policies and procedures.

We made recommendations to address these issues. The consortium
generally agreed with our recommendations.

Weak Internal Controls Persist at a
Federally Funded Research and Development Center

NSF is the primary funding source for, and is responsible for the
oversight of, five Federally Funded Research and Development
Centers. As of January 1, 1991, NSF awarded a $63.7 million, 5-year
cooperative agreement to a university to manage a Federally Funded
Research and Development Center that conducts research in radio and
radar astronomy and atmospheric science.

We reviewed the internal control structure and assessed the
observatory's compliance with federal regulations. We found 15
internal control and compliance weaknesses, of which 10 were
reported in an October 1987 report by the Division of Audit and
Oversight (our predecessor office).

The observatory did not separate the payroll assistant's
responsibilities for calculating and distributing an annual cash
payroll; the administrative assistant's responsibilities for
preparing bills and receiving the payments for those bills; or the
purchasing manager's responsibilities for authorizing purchases and
making payments for those purchases from a petty cash fund.  These
functions should be separated to reduce the potential for fraud and
abuse. We made recommendations in our report to correct these
weaknesses and ensure that the University implements internal
controls to protect NSF funds (as also recommended in the 1987

Educational Society Reduces
Proposed Cost Sharing

NSF awarded a $375,000 grant to an educational society to support
high-school chemistry and biology teachers' summer research
projects.  We found that the society had reduced its promised cost
sharing for teacher stipends without notifying NSF.  According to
the original award proposal, NSF and the society planned to spend
$900,000 in teacher stipends to support the award objectives. NSF
was to provide $300,000 for stipends for 150 teachers ($2,000 per
teacher), and the society was to provide  $600,000 ($4,000 per
teacher).  However, the society reduced its planned cost sharing
amount from $600,000 to $450,000 ($3,000 per teacher).  The society
determined the lower teacher stipends were more reasonable than the
original amount. We recommended that NSF require that the society
notify the NSF grants officer of its intention to reduce teacher
stipends by $150,000 and proportionally reduce NSF's costs for
teacher stipends. The society agreed to contact NSF to discuss
alternatives to the cost sharing arrangements. NSF's grant and
program offices will make the final decision on the issues
discussed in the report.

Academic Institution Made Excessive
Cash Requests for NSF Grants

NSF, by authority of Treasury Department Circular No.  1075 (31
CFR, chapter II, part 205), allows academic institutions as well as
other award recipients under the Letter-of-Credit -Treasury
Financial Communication System to use E-Mail messages to request
federal funds. This System was designed to make cash advances
available to an award recipient within 1 workday of the recipient's

An academic institution in the northcentral United States did not
require periodic reviews of the total amount of available federal
cash. As a result, the institution requested and drew down funds
that exceeded the awards' immediate disbursement needs. We
determined that the institution earned $98,834 in interest over a
5-year period on the excessive cash balances on NSF awards. This
interest was not remitted to NSF as required. We recommended that
the interest earned be returned to the government. The institution
generally concurred with the finding and recommendations.


The investigations section is responsible for investigating
violations of criminal statutes or regulations involving NSF
employees, grantees, contractors, and other individuals conducting
business with NSF.  The results of these investigations are
referred to federal, state, or local authorities for criminal or
civil prosecution or to NSF's Office of the Director to initiate
administrative sanctions or penalties.


We place a high priority on allegations involving embezzlement,
diversion of grant or contract funds for personal use, or other
illegal use of NSF funds. Deliberate diversion of NSF funds from
their intended purpose is a criminal act that can be prosecuted
under several statutes. We encourage universities and other
grantees to notify NSF of any significant problems relating to the
misuse of NSF funds.  Early notification of significant problems
increases our ability to investigate allegations and take
corrective action to protect NSF and its grantees.



Active Cases From Prior
Reporting Periods                                 26

New Allegations                                   21

          Total Cases                             47

Cases Closed After
Preliminary Assessment                             2

Cases Closed After
Inquiry/Investigation                             17

Total Cases Closed                                19

          Active Cases                            28

The following section describes cases involving the diversion of
funds that we investigated during this reporting period.

Felony Conviction Involving
Science Education Award

In Semiannual Report Number 11 (page 21), we reported that, as a
result of our investigation, a PI at a western research foundation
and university agreed to plead guilty to violating 18 U.S.C.
666, Theft or Bribery Concerning Programs Receiving Federal Funds.
The PI fraudulently diverted $27,118 in NSF and Department of
Education grant funds to his personal financial account. In
addition, the PI caused unauthorized stipend payments to be issued,
totaling $60,249, under the grants. The PI was able to misuse these
funds by obtaining sole signature authority for grant expenditures.
The PI caused illegitimate stipend checks to be issued by appending
false names onto stipend vouchers and signing the vouchers; once
the checks were issued, the PI picked them up from the business
office.  Though the research foundation's policy required that
stipend checks be reviewed by two or more persons, the PI, by
obtaining sole signature authority and retrieving the checks
himself, was able to conceal the improper checks. The PI then
either forged the payees' signatures or told the payees that the
checks were issued in error and requested a cash refund, then
deposited the funds into his personal account. The PI also used the
stipend checks to provide Christmas bonuses, pay for clerical help
to work on the PI's non-grant-related textbook, and provide
financial assistance to students.

After providing a sworn statement detailing these facts, the PI
resigned from his positions at the research foundation and
university, reimbursed the research foundation $87,361 for the
fraudulent and improper expenditures, and agreed to plead guilty in
U.S. District Court. However, before the PI's court appearance,
further investigation and audit of the grant accounts found that
the PI had improperly spent an additional $52,886 in grant funds.
On February 17, 1995, the PI was arraigned and sentenced to 5
years' probation, ordered to perform 500 hours of community
service, and ordered to pay $52,886 in additional restitution. If
the PI fails to pay the full restitution, his probation will be
revoked, and he will be imprisoned. We also recommended to NSF that
the PI be debarred from receiving federal funds and participating
in grants for 3 years.

NSF Funds Awarded for
Physics Research Misused

We were notified by a southern university that an internal audit
had identified a possible misuse of NSF funds. The university
alleged that an NSF grantee's wife improperly received payment
under three of the PI's NSF grants. We conducted an investigation,
which we coordinated with university officials. We found that the
PI's wife owned a business that, from September 1986 to May 1994,
submitted 119 invoices for payment to the university. Based on
these invoices, the university issued payments totaling $80,237. Of
this amount, $61,186 was charged to the NSF awards.

The company submitted invoices for services that were almost
exclusively provided by the PI's wife, who assisted her husband
with nontechnical research, the preparation of proposals and
reports, academic activities, and other general secretarial duties.
Many of the duties the PI's wife performed were not related to the
NSF grants. The PI's wife conducted her work in his office and
laboratory at the university, then, at the PI's direction,
submitted invoices to the university. We found that the PI caused
payments to be charged to the NSF grants with full knowledge that
much of the work performed did not relate to the grants.

We also found that, while the PI charged secretarial and
administrative assistance provided by his wife to three separate
NSF grants, the grant budget proposals he submitted to NSF did not
request funds for secretarial, administrative, consultant, or
subcontract services. The PI also did not request that the
university approve the rebudgeting of grant funds to pay for the
services provided by his wife presumably because the university's
personnel process would have excluded his wife from working as his

All payments from NSF grants to the wife's business were
inappropriate under the university's policy, NSF's grant
conditions, and OMB Circular A-110, attachment O.  Attachment O
states, "No employee, officer or agent shall participate in the
selection, award or administration of a contract in which Federal
funds are used, where, to his knowledge, he or his immediate
family. . . has a financial interest." We found that the PI had a
clear financial interest in the company, and, as a university
employee, the PI knowingly participated in the selection, award,
and administration of a contract to his wife's company.

As a result of our investigation, the university refunded to NSF
$61,186, the amount charged to the NSF grants for payments to the
company. The university also developed systemic controls to
supervise the PI's future expenditure of NSF funds.

Misuse of NSF Funds Awarded
for Engineering Research

We received an allegation that a researcher at a west coast
research center had been shifting funds from an NSF grant to other
research projects without the knowledge of the grant's PI. The
researcher allegedly used postdoctorate and graduate research
assistants, who were paid with NSF grant funds, to conduct research
on other, unrelated projects. Our review disclosed that one
postdoctorate research assistant, whose salary was supported solely
by an NSF grant, expended 45 percent of his time on research that
was not related to the NSF grant.

The PI on this grant had not authorized the research assistant to
work on other projects and had notified the research center about
the problem. After our review, the research center credited the NSF
grant $14,000 and agreed to monitor the researcher's future


Small Business Innovation Research
Company Pleads Guilty to a Felony

We continue to conduct investigations involving fraud in the Small
Business Innovation Research (SBIR) program.  Several cases remain
under review by the Department of Justice. During this reporting
period, an SBIR company agreed to a settlement that resolved all of
the criminal, civil, and administrative issues that were developed
during our investigation of the company.  The company agreed to
plead guilty to one felony count of submitting false statements
concealing the submission of identical Phase I SBIR proposals to
NSF and the National Aeronautics and Space Administration. The
company had been paid $50,000 each for the two duplicate Phase I
awards it wrongfully received, and the company agreed to pay
$115,000 to the government in a civil settlement. In addition, the
company and the PI agreed to a voluntary 3-year exclusion from the
SBIR program.

Recommendations for Systemic Reform
in the SBIR and Small Business
Technology Transfer Programs

In Semiannual Report Number 10 (page 21), we described several
systemic recommendations to reduce the potential for fraud and
abuse in the SBIR program. We recommended that the Small Business
Technology Transfer program also consider implementing these
recommendations because the same potential for fraud exists in that
program as exists in the SBIR program. In this reporting period,
NSF made significant progress toward implementing our

     Fixed-Price Awards for Phase II.  In Semiannual Report Number
10 (page 20), we discussed NSF's decision to award fixed-price
grants for Phase II awards. This change means that the grantee will
not provide detailed financial information during the period of the
award. We are concerned that this could diminish our ability to
detect and prosecute fraud from misuse of NSF funds. We recommended
that NSF ensure that sufficient financial information is received
during the course of these $300,000 awards. In this reporting
period, NSF decided to conduct a 2-year experiment during which one
half of the SBIR Phase II awardees will report detailed financial
expenditures by category and by overall estimated expenditures.
The other half will report only their overall estimated
expenditures. At the end of the experiment, NSF will determine
whether obtaining expenditures by category is helpful in
identifying fraud. We are working with NSF to choose the two groups
for the experiment. We will develop data, in cooperation with NSF,
on our ability to detect fraud in each group.

     Grant Funds to be Used for Research-Related Purposes Only.
Under fixed-price awards, recipients may use  excess funds for any
purpose they desire. Fixed-price awards are usually used when a
particular product is expected as a result of work completed under
the award. The government agrees to pay a set amount for this
product, regardless of the actual production cost. As a result, the
awardee assumes the risk of the cost exceeding the award amount but
receives a monetary benefit if the work costs less than expected.
The fixed-price concept does not fit SBIR awards perfectly because
there can be great flexibility in the conduct of the funded
research. Since the research protocol is flexible, we were
concerned that awardees might be encouraged to choose less costly
alternatives to their proposed research so that they can keep the
excess money instead of those more expensive alternatives that
would further the project to a greater extent. We recommended that
NSF require that all grant funds under these awards be used for
research-related purposes. NSF's Engineering division, which
administers the SBIR program, has amended the solicitation to
include this requirement, which they believe more accurately
reflects the program's intent.


                    TABLE 2

New Referrals                           2

Referrals From Previous
Reporting Period                        5

Prosecutorial Declinations              3

Criminal Convictions/Pleas              1

Civil Action Initiated                  1

Civil Complaints From
Previous Reporting Period               1

Civil Judgments/Settlements             2

Administrative Actions                  3

Investigative Recoveries*          $445,506
*Investigative Recoveries comprise civil and criminal judgments,
fines, and restitutions as well as specific cost savings for the

     NSF's Progress on Other SBIR Recommendations.  NSF has issued
solicitations for the SBIR and Small Business Technology Transfer
programs that implement our recommendations. In addition, the Small
Business Administration (SBA) has continued work on an SBIR
program-wide database, which, when implemented, will reduce the
potential that duplicate proposals could receive awards from
different agencies.

     General Accounting Office's Endorsement of OIG
Recommendations.  Since we issued our recommendations, the General
Accounting Office (GAO) began to review the SBIR program. In its
March 1995 report, "Interim Report on the Small Business Innovation
Research Program," GAO agreed with our conclusion that the
information available on SBIR awards government-wide is outdated.
Accordingly, GAO adopted our recommendation that the SBA create an
SBIR program-wide database. GAO also agreed with our assessment
that duplicate funding is a problem in the SBIR program and that
the system of certifications is inadequate because the questions
asked are vague.  NSF has alleviated this problem in its
solicitation by adopting our recommendations defining "overlapping
work," "overlapping proposals," and "equivalent proposals," key
terms in the certification regarding duplicate funding. To address
these problems programwide, GAO recommended that the SBA implement
our recommendations regarding the definition of key terms involving
duplicate funding and the strengthening of the certifications
regarding the submission of duplicate proposals.


Procurement Integrity Act Violation

In Semiannual Report Number 11 (page 26), we reported that during
our investigation of a violation of the Procurement Integrity Act,
a senior NSF official admitted that he released source selection
information to a contract bidder.  We found that the contract
bidder had received the source selection information from the NSF
official and used that information to submit a final bid for the
contract.  In this reporting period, the U.S. Attorney and the
contract bidder agreed to a civil settlement to resolve this
matter.  In addition, the contract bidder agreed to a voluntary
3-year government-wide exclusion from federal procurement.

Insurance Sales Abuses

We received complaints from NSF employees that uninvited insurance
agents had been pressuring them to buy health and life insurance
and had misrepresented the insurance they were offering.  NSF
employees told us that the insurance agents made numerous
unexpected telephone calls and visits to NSF offices during
business hours.  The insurance agents also misrepresented
themselves as affiliated with NSF during initial contacts with the
employees.  Federal regulations forbid any solicitation on
government property without arranging an appointment in advance
with an employee and receiving prior authorization from management.

We confirmed that three agents from different companies had been
soliciting supplemental life insurance on NSF property and
misrepresenting themselves.  Although we found that the companies
were legitimate, the agents had neither received prior
authorization to be present on government property nor, in some
cases, previously scheduled appointments with NSF employees.  We
also found that the agents regularly advised their NSF clients to
switch to different insurance carriers with claims of providing
better benefits without loss to the employee.  The practice allowed
the agents to regularly collect first-year commissions.  However,
by switching insurance carriers, NSF employees would often lose
some or all of the money invested in their previous insurance
carrier.  We referred our findings, including possible
misrepresentation, to the Bureau of Insurance for the Commonwealth
of Virginia, State Corporation Commission.  The Bureau's
investigation of one of the agents is complete, and final
disciplinary action, which could result in suspension of the
agent's insurance license, is pending.  The investigations of the
two other agents are continuing.  After the State of Virginia's
final actions, the reports will be referred to the Bureaus of
Insurance in Maryland and Washington, D.C., for continued
investigation and possible action in those jurisdictions.

Metro Subsidy Abuse

NSF employees at pay Grades 10 and below use Metro (the Washington,
D.C., metropolitan area public transportation system) to travel to
and from NSF are eligible for a $21-per month subsidy.  To receive
the Metro subsidy, employees certify that the Metro or other form
of public transportation is their primary mode of transportation to
and from NSF.

During an investigation, we identified two NSF employees who had
been receiving the Metro subsidy since January 1994, but who had
been commuting to work daily by car.  When questioned, the
employees admitted that they had been driving to and from NSF and
not using public transportation.  We recommended that NSF recover
the costs of the Metro subsidy paid to these employees and take
administrative action.


The Office of Oversight focuses on the science-engineering-
education-related aspects of NSF operations and programs.  It
oversees the operations and technical management of the
approximately 200 NSF programs that involve about 60,000 proposal
and award actions each year.  The Office conducts and supervises
compliance, operations, and performance reviews of NSF's programs
and operations; undertakes inspections and evaluations; and
performs special studies.  It also handles all allegations of
nonfinancial misconduct in science, engineering, and education and
in continuing studies on specific issues related to misconduct in



NSF's misconduct in science regulation affirms that "awardee
institutions bear primary responsibility for prevention and
detection of misconduct" (45 C.F.R.  689.3 (a)). Awardee
institutions are routinely called upon to protect the integrity of
science, engineering, and education activities in which NSF is
involved, and most of them have internal regulations that serve
this purpose. At the same time, NSF has its own independent
responsibility, which it cannot delegate to awardees, for dealing
with misconduct in science in connection activities it funds.

When we deal with awardee universities in connection with
misconduct cases, we try to achieve a cooperative partnership that
does not compromise either partner's independence. We have observed
that awardees do not always fully understand our relationship and
may feel that an investigation is a task we give them to perform
according to our specifications. It would benefit both partners if
there were a better understanding of the cooperation and
independence that the proper handling of these cases requires. In
particular, everyone should understand that both partners can take
their own actions when the case is concluded.  In some instances,
the partners will legitimately take different actions.

Active cooperation on a case usually begins when either we or an
awardee has conducted an inquiry and has determined that an
allegation of misconduct requires investigation.  If the awardee
has conducted the inquiry, it informs us that it is about to begin
an investigation.  If we conducted the inquiry, we usually inform
the subject's institution, which may ask us to delay our
investigation while it does its own.  We prefer that, whenever
feasible, awardees conduct their own investigations of allegations
directed at their faculty members or students.

When the awardee university begins an investigation, we provide
guidance about what would make the investigation adequate for our
purposes.  The university is not our agent or our subordinate and
is not required to follow our guidance. It must comply with its own
standards for conducting investigations.  However, we hope that the
university's investigation will provide the information we need so
we do not have to conduct a separate investigation.

When a university completes its investigation and adjudication of
a case, it sends us an investigation report. We review the report,
and we often go back to the university with questions that give it
the opportunity to clarify its report or to collect evidence
relevant to our questions. If we have difficulties with the
university's investigation that cannot be resolved, we perform our
own investigation.

The purpose of our review is not to approve or disapprove of the
university's way of conducting investigations, but to decide
whether we can use the university's investigation in place of one
we would do ourselves. Similarly, we want to know what action the
institution took regarding a case to decide whether that action is
sufficient to protect public funds in the future or whether NSF
needs to take additional action. When the university has completed
its investigation and adjudication, its action is final, and NSF
has no authority to overturn it. On the other hand, NSF has the
authority to take an action of its own that is independent of the
university's action.

If we wish to recommend a finding of misconduct and an action by
NSF, we write a report explaining our conclusions and
recommendations to NSF's Deputy Director, and she adjudicates the
case. In her adjudications, she reaches her own decisions about the
facts and applies the standards in NSF's regulation on misconduct
in science, not the university's standards. As a result, the Deputy
Director may sometimes make a finding of misconduct where the
university did not, or she may not find misconduct even though the
university did.  There are numerous reasons why a university and
NSF might reach different conclusions about a case. For example,
they may have different definitions of misconduct, standards of
proof, assessments of evidence, or views about the role of intent
in misconduct findings. Where a university and NSF agree that a
subject has committed misconduct, they may not agree as to the
actions that should be taken.  It is entirely appropriate for NSF
and the university to exercise independent judgment and arrive at
different conclusions.

NSF makes adjudications of misconduct cases involving NSF proposals
and awards because, in the final analysis, NSF has its own
responsibility for protecting federal funds by upholding ethical
standards in NSF's proposal and award processes. This
responsibility is parallel to, but independent of, the university's
responsibility. We try to cooperate with awardee institutions and
the scientific community to achieve our shared goals and meet our
independent responsibilities.



Fabrication, falsification, plagiarism, or other serious deviation
from accepted practices in proposing, carrying out, or reporting
results from activities funded by NSF; or retaliation of any kind
against a person who reported or provided information about
suspected or alleged misconduct and who has not acted in bad faith.



OIG Accepts University
Assessment of Seriousness

A review panel member alleged that a researcher included in an NSF
proposal a paragraph describing a laboratory procedure that was
practically identical to a paragraph in a published article written
by another scientist. Further inquiry revealed two additional
instances in which the subject had incorporated this paragraph into
proposals without proper citation.

We determined that an investigation was warranted, and the
subject's university conducted it. The university's investigating
committee decided that the subject had not committed misconduct in
science. It based its conclusion on its assessment of the subject's
intent. However, the evidence indicated that the subject copied the
material knowingly. We concluded that the subject's intent would
not preclude a finding of misconduct. We were uncertain, however,
whether what the subject did was sufficiently serious to be
considered "a serious deviation from accepted practices" and hence
to be misconduct as NSF defines it.

We asked the university whether it believed the subject's act, if
done knowingly, would be misconduct in science. The dean replied
that, in view of the total set of circumstances surrounding the
act, the university did not view it as misconduct. In this case,
several factors, no one of which alone would disqualify an act from
being misconduct, mitigated the seriousness of what the subject
did.  Among these were the following facts.

          The copied paragraph occurred in proposals in which the
          article was frequently cited.

          The subject made clear the source of the ideas.  The only
          originality of the passage that the subject copied lay in
          its original combination of words.

          The passage itself was only one paragraph long.

          The subject was an inexperienced investigator with a
          limited command of the English language who had been
          trained in another country.

The dean of the university sent the subject a letter stressing the
importance of appropriate citation and quotation, and the chair of
the investigating committee spoke to the subject about this matter.
We concluded that the subject's university officially recognized
the inappropriateness of what the subject did and took suitable
action. The university found that the behavior, though
inappropriate, did not rise to the level of misconduct in science.
This case illustrates that, where the seriousness of a clearly
inappropriate act is in question, we give great weight to the
university's assessment of whether, in its local ethical
environment, the act was considered serious enough to be



                                        FY 1994        FY 1995
                                        Last Half      First Half

Active Cases From
Prior Period                                 80             80

Received During
Period                                       20             27

Closed Out During
Period                                       20             26

In-Process at End
of Period                                    80             81


Plagiarism in Three Proposals
Submitted to NSF

We were informed that officials from a southern institution were
conducting an inquiry into possible plagiarism in a proposal
submitted to NSF. At the end of the inquiry, rather than conducting
an investigation, the officials informed the subject that he could
either submit the matter to a faculty committee, resign, or
acknowledge unauthorized use of material. The subject acknowledged
unauthorized use of material and apologized to the source
proposal's co-PI. Thereafter, the subject was denied tenure and
left the institution.

Based on the institution's inquiry, we found that there was
sufficient substance to the allegation of misconduct to warrant an
investigation to determine how the subject obtained the source
material and the extent of his culpability. Ordinarily, we defer
such investigations to the institution. However, because the
subject was no longer affiliated with the institution, we conducted
our own investigation.

We determined that material from the source proposal had been
incorporated into three NSF proposals for which the subject was the
PI. In 2 proposals, 69 lines were identical to those in the source
or had many words in common; in the third, 109 lines had identical
or substantially similar wording.

We concluded that this was a significant case of plagiarism because
the text copied was extensive and described the overall rationale
of a student training program, which was central to the review and
evaluation of the proposals.  Moreover, the subject engaged in a
pattern of plagiarism by copying text into three different
proposals. The subject further impaired his credibility and
responsibility by developing different and contradictory
explanations as to how the material became incorporated in his

We forwarded our report to NSF's Deputy Director with a
recommendation that she find that the subject had committed
misconduct in science. We recommended that NSF debar the subject
from receiving funds from any federal agency for 1 year. We also
recommended that NSF inform the subject's new institution that the
subject has been debarred so that the institution can comply with
the debarment certification on the cover sheet on any proposals the
subject submits to NSF.

The institution had a misconduct policy that required an
investigation if the charges were not dismissed after the inquiry,
but the institution conducted no investigation. This case
illustrates why it is important for institutions to handle
allegations of misconduct in accordance with their institutional
policies. In doing so, they can fully address the issues and bring
the matter to closure so that the subject does not face proceedings
after moving to a new institution.

Finding of Misconduct Without
Intent to Deceive

A PI submitted a proposal that contained several paragraphs in its
literature review that were identical or substantially similar to
material in an article published by two other scientists. He told
us that when he submitted the proposal, he believed the grammatical
changes he made in the original text rendered the use of quotation
marks inappropriate, and that he "may have erred by using parts of
sentences verbatim without proper citation."

We referred this case to the subject's university for
investigation. The university found that the subject had committed
plagiarism and reprimanded him. It required that for 2 years,
whenever the subject submits manuscripts for publication or
proposals for funding, he certify to university officials that he
has properly cited his source materials.

The university's investigating committee noted that when the
subject submitted the proposal he "did not appreciate that he was
making a mistake" and was not aware of "what constitutes plagiarism
in this context." The university concluded that these facts did not
preclude a finding of misconduct. We agreed with this conclusion.
In our report to the Deputy Director, we explained that a senior
scientist, such as the subject, who believes that he does not need
to indicate that his NSF proposal incorporates the words of a
published article is grossly negligent. He has failed to acquire
knowledge that is central to an essential competence of his
community, i.e., knowledge of how to credit the work of other
scientists and avoid misappropriating credit for himself. We
concluded that NSF should not excuse plagiarism that stemmed from
this failure, even if the subject did not knowingly intend to

We recommended that NSF make a finding of misconduct and reprimand
the subject.  We did not recommend that NSF take additional action
because we believed the subject's university had acted responsibly
and, in imposing its own certification requirement, had adequately
protected NSF's interest in maintaining the integrity of its
proposal and award processes.  NSF agreed with our recommendations.
It found that the subject's act was  plagiarism "regardless of
whether [he] realized at the time that citations should have been
provided," and it sent the subject a letter of reprimand.

This case illustrates why a finding of misconduct should not
require proof of an intent to deceive. The case also illustrates
the successful partnership between OIG and a grantee university in
handling an allegation of misconduct. When we informed the
university of the allegation, it investigated competently and acted
judiciously to resolve the matter. Such responsible action is a
model for handling misconduct cases.

Misrepresentations of Publications
in Proposals Submitted to NSF

We were informed by an institution that it had concluded an inquiry
into allegations that the subject had misrepresented the status of
his scientific research publications in a variety of documents,
including proposals to NSF, and that it was beginning an
investigation into these allegations. The institution subsequently
provided us with its investigation report, its finding of
misconduct in science, and a copy of its letter of censure to the
subject. We found that we required additional information for our
evaluation of these allegations and initiated our own

We determined that the subject had misrepresented his research
productivity. He stated that he had submitted three manuscripts to
scientific journals when they actually were only drafts or partial
drafts. These misrepresentations appeared in seven proposals
variously submitted to the institution, NSF, another federal
agency, and a private foundation. We found these misrepresentations
in many of the submitted curricula vitae, bibliographies, and prior
support statements accompanying these proposals. We also found
misrepresentations in materials submitted for two annual reviews at
the institution, in a departmental brochure, and in a final report
submitted to a state funding agency. We found a total of 40
misrepresentations, of which 13 appeared in NSF proposals.  One of
the NSF proposals became a large multiyear award.

The subject told us that he had not intentionally tried to deceive
anyone and characterized his misrepresentations as administratively
careless.  He said he made the false statements because proposal
evaluation takes so long and he fully expected to submit the
manuscripts to the journals shortly after he had submitted the
documents containing the false statements.  He said that such
misrepresentations were common practice within his scientific
community. We found that, among other things, the subject had made
false representations about the status of his manuscripts in
several documents that did not have long lead times associated with
their review.  Hence, we did not find the subject's explanation

The institution's investigating committee concluded that the
institution's personnel committee's intense pressure on the subject
to publish papers and obtain funding motivated his actions. After
reviewing the chronology and content of the personnel reviews, we
agreed with the committee's assessment.

We concluded that a preponderance of the evidence showed that the
subject willfully misrepresented the status of his manuscripts and
successfully deceived reviewers, program managers, and
institutional officials into thinking he was more successful than
he really was.  It is not a common practice in the subject's
scientific community, or the broader scientific community, to
present false information to federal agencies. The presence of
these misrepresentations in so many places, and over a period of 13
months, demonstrated a broad pattern of behavior.

We forwarded our report to NSF's Deputy Director with a
recommendation that she find that the subject had committed
misconduct in science. We also recommended that for 5 years, any
proposals the subject submits, or on which he is named as a co-PI,
be accompanied by a certification to our office from the subject
that they contain nothing that violates NSF's misconduct in science
regulation. We also recommended that the subject obtain, and send
to our office, his department chairperson's assurance that, to the
best of that person's knowledge, the submission does not contain
any false representations about the status of manuscripts.  These
recommendations are awaiting NSF's action.

Misrepresentation of Credentials

A computer research company informed us that a PI in its employment
submitted proposals on two occasions to NSF that misrepresented his
credentials. The proposals, which involved providing network
services, included a resume claiming that the subject had earned a
B.S. degree in biology, when, as our investigation confirmed, he
had not. After the company learned of the subject's
misrepresentation, it took steps to terminate the subject's
employment, and he resigned from his position.

In response to the subject's misconduct and to emphasize the
importance that NSF places on truthful representations in proposals
and other documents submitted to NSF, we recommended that NSF's
Deputy Director make a finding of misconduct and that the subject
be sent a letter of reprimand. We also recommended that for a
period of 1 year, the subject be required, when he submits
proposals to NSF, to certify to OIG that all information in his
proposals is correct to the best of his knowledge. Because the
subject had already lost his long-held job as a direct result of
his misrepresentation to NSF, we concluded that more severe actions
by NSF were unnecessary.

In this case, the subject's 25 years of experience in working with
computers were probably far more relevant in assessing his
qualifications for the proposed work than his alleged possession of
a B.S. degree in an unrelated scientific discipline. Nonetheless,
a misrepresentation need not have been material to NSF's decision
about a PI's competence to be considered misconduct.  The subject's
action seriously violated professional standards for the
preparation of proposals, and we believe that NSF needs to
reinforce those standards by making a finding of misconduct in this


Proposal Seeking Funds for
Already Completed Research

In Semiannual Report Number 11 (page 30), we discussed a case in
which a scientist submitted a proposal misrepresenting research
that had already been completed as work that would be done under
the NSF award that he sought.  The scientist also directed that his
collaborator's name be signed on the proposal's certification page
without the collaborator's permission.  NSF's Deputy Director
concurred with our recommendations in this case.  She found that
the subject committed misconduct, sent him a letter of reprimand,
and required that until January 1, 1997, when the subject submits
proposals to NSF, both he and an official of his institution
certify to the Assistant Inspector General for Oversight that to
the best of their knowledge the proposal accurately states what
parts of the research agenda have and have not been performed.

Plagiarism in a Proposal Submitted to NSF

In Semiannual Report Number 11 (page 28), we discussed a case in
which a PI had plagiarized text in his NSF proposal from another
scientist's dissertation.  As a result of our recommendation NSF's
Deputy Director found that the PI had committed misconduct in
science and she required that, for the next 3 years, when the
subject is the PI or co-PI on an NSF proposal, he submit a
certification to our office stating that he had reviewed NSF's
misconduct regulations and that the proposal is free of anything
that violates those regulations.  The Deputy Director also required
that the subject submit an assurance from his department
chairperson that, to the best of that person's knowledge, the
submission does not contain plagiarized material.

Violation of Confidential Peer Review

In Semiannual Report Number 11 (page 29), we discussed a case in
which a foreign scientist had submitted a proposal to a foundation
in his country that contained text, figures, and equations
plagiarized from an NSF proposal he had received for peer review.
We recommended that NSF's Deputy Director find that the reviewer
had committed misconduct in science and bar him from serving as an
NSF peer reviewer for 5 years.  The Deputy Director concluded that,
while the reviewer's conduct was inappropriate, she could not
concur with our recommendation for a finding of scientific
misconduct because the situation was not clearly covered under
NSF's scientific misconduct regulations.  The Deputy Director
directed that ". . . NSF proceed with a clarifying amendment to
those regulations that will specifically include activities carried
out in the course of review of NSF proposals as one of the areas in
which NSF will consider issues of misconduct in science."  In an
administrative action outside of NSF's misconduct regulation, the
subject was sent a letter of reprimand and barred from
participating in NSF's peer review system for 5 years.


In addition to their work on misconduct in science cases and
inspections, the Office of Oversight's scientists and engineers
helped organize and participated in the American Association for
the Advancement of Science-American Bar Association 2-day seminar
on Investigating Allegations of Misconduct: A Practicum held in San
Francisco, California, on December 12 - 13, 1994; presented a paper
on NSF misconduct in science policies and procedures in a session
on ethics in research at the Boston Colloquium for Philosophy of
Science held on November 14 - 15, 1994, at Boston University;
attended all seven Washington, D.C., meetings of the Department of
Health and Human Services' (HHS) Commission on Research Integrity;
accepted an invitation to attend the HHS Commission's regional
meeting in Chicago; initiated a series of seminars with scientists
and engineers in NSF's 33 research and education divisions to
enhance communication between NSF and OIG and to discuss OIG's role
in handling allegations of misconduct in science;  conducted
briefings on the OIG for NSF staff members; and coordinated OIG's
reviews of NSF's draft Grant Policy Manual and NSF's draft Grant
Proposal Guide.




Number of Cases Requiring Assurances
and/or Certifications at End of Period                      5

Assurances Received During This Period                      2

Certifications Received During This Period                  5

*The Deputy Director accompanies some findings of misconduct in
science with a certification requirement.  For a specified period,
the person found by the Deputy Director to have committed
misconduct must confidentially submit to the Assistant Inspector
General for Oversight a personal certification and sometimes an
institutional assurance that any newly submitted NSF proposal does
not contain anything that violates NSF's regulation on misconduct
in science and engineering.  These documents remain in the Office
of Inspector General and are not known to, or available to, NSF
program officials.


In March 1993, the President's Council on Integrity and Efficiency
issued its Quality Standards for Inspections to guide the conduct
of inspection work. These standards define an inspection as a
process, other than an audit or investigation, that evaluates,
reviews, studies, and/or analyzes the programs and activities of a
Department or Agency to provide information to managers for
decisionmaking; make recommendations to improve programs, policies,
or procedures; and recommend administrative action.

We view inspections as an especially effective approach for OIG
oversight in our agency because of the highly technical nature of
NSF's mission.  Our inspections are on-site reviews both within the
NSF itself and at the institutions that receive NSF funding. OIG
staff assess organizations' compliance and effectiveness in three
major areas: finance, administration, and achievement of science
and engineering program goals in research and education. Our
inspections supplement OIG's ongoing audit and investigative
activities by broadening accountability beyond financial and
administrative compliance requirements to assess the responsiveness
of research and education activities to program goals.  Our
external on-site reviews promote an increased awareness by PIs and
their sponsoring institutions of the importance of accountability
in the management of, and performance under, NSF awards.

The composition of any team depends on the expertise required to
understand the research or activity to be inspected. Team members
may include scientists and engineers, auditors, computer
specialists, investigators, lawyers, or management/program
analysts.  If the expertise is not represented by OIG staff,
consultants from the private sector or other federal agencies may
be used.  Evaluation of the inspected institution's policies and
procedures, award documentation, and related financial records is
performed both in advance of, and during, the inspection.


During our inspections, we conduct reviews in the following three

Financial Review

Our objectives are to evaluate the adequacy of internal controls
for NSF awards within the department or other institutional
subunit, and to assess compliance with the institution's financial
policies and procedures established to meet federal laws and

Management and Administrative Review

The objectives of this portion of the inspection are to evaluate
the institution's ability to resolve allegations of misconduct in
science and to determine the adequacy of the institution's handling
of misconduct allegations; assess the institution's compliance with
regulatory requirements, such as drug-free workplace, lobbying
certification and reporting, and nondiscrimination; assess the
climate for the advancement of women and racial minorities as
scientists and faculty members; and learn about and evaluate any
institutional requirements governing employees' financial

Program and Research Review

The objectives of this portion of the inspection are to assess the
scientific aspects of the projects funded under the grant awards
reviewed, evaluate the adequacy of the facilities and other
institutional support for these efforts, determine the PIs' views
on issues related to the NSF awards covered by the inspection, and
develop an understanding of the PIs' impressions of the quality and
adequacy of NSF's proposal review and award processes including NSF
program officials' interactions with PIs.

Our First Twelve Inspections--Common Problems,
Positive Findings, and Model Programs

We have now conducted 12 inspections at 6 state research
universities; 3 private research institutions; and 3 private,
primarily undergraduate institutions.

Common Problems

In all of the inspections, we raised questions about the
institutions' procedures for handling allegations of misconduct in
science. Our recommendations in this area were intended to help
institutions handle allegations in a way that is consistent with
NSF's Regulation on Misconduct in Science. For example, we
recommended that eight institutions establish a standard of proof
for determining whether evidence warrants a finding of misconduct
in science. We also noted that five institutions did not indicate
if or how their misconduct policies and procedures would apply to
students working under NSF awards. Despite NSF's requirement, one
institution had no stipulation in its policy for informing NSF when
it begins an investigation, and another institution had no
misconduct policy or procedure. We recommended that five
institutions increase their faculty members' and students'
awareness about their policies and procedures for handling
allegations of misconduct in science as well as about NSF's
Misconduct Regulation.

To address these concerns, we emphasized to three institutions the
importance of training graduate students in the ethics of research.
In other areas, we recommended that nine institutions establish an
institutional policy for retention of, and access to, research
records produced under NSF awards. We encouraged three institutions
to increase their efforts to recruit and retain minority and female
faculty members and students.

All of the institutions generally complied with financial
requirements in NSF's award documents, the Grant Policy Manual, the
Grant General Conditions, OMB Circulars, and other federal
requirements. However, we did make recommendations to improve
compliance and strengthen internal controls.

At one institution, we found so many material deficiencies that we
recommended the initiation of a financial and compliance audit by
our Office of Audit. We recommended that four institutions
implement a system to ensure that cost sharing is traceable in the
official books of account and that institutions conduct
after-the-fact confirmation of personnel activity reports, which
are initially based on estimates.  At three institutions, we
recommended that they ensure that cost or price analyses are
conducted for all purchases made. We recommended that eight
institutions strengthen their internal controls by requiring
preapproval of certain costs by a qualified institutional official
other than the PI on the NSF awards. These costs involved changes
to original budgets, travel and its associated costs, and
requisitions for supplies and services.

We assessed each institution to determine its preparedness to meet
NSF's planned Investigator Financial Disclosure Policy. Of the 10
institutions that had conflict-of-interest policies, none would
meet all of the requirements of NSF's new policy. Two institutions
had only draft policies. All the institutions indicated that they
were revising their policies to comply with the expected disclosure

Positive Findings and Model Programs

          We found that a state university's financial system for
          handling cost sharing and its internal control system for
          personnel activity reporting were notably good (OIG
          94-3503). A private institution designed and implemented
          a procurement system that properly documents some form of
          cost or price analysis for purchases made on federal
          awards (OIG 94-3506). These three systems were
          significantly better than those we observed at other
          institutions and clearly demonstrated that cost sharing,
          effort reporting, and cost or price analyses can be
          documented in ways that comply with federal requirements
          and are cost-effective and viable for the funded

          We learned about programs or mechanisms that officials at
          inspected institutions viewed as successful in recruiting
          women and minorities to careers in science and related
          technical/academic pursuits.  We believe that some of
          these could serve as models, in whole or in part, for
          other institutions.

               An undergraduate institution attracted
               minorities to careers in the aquatic sciences
               by facilitating student attendance and
               participation at professional scientific
               meetings (OIG 95-3503).

               A state university facilitated graduate study
               using a Summer Pre-Graduate Research
               Experience Program and the Partnership for
               Minority Access to Doctoral Degrees Program
               (OIG 94-3503).

               A state university orchestrated six, unrelated
               state and federally funded programs that
               focused on science and math skills to provide
               an academic bridge from sixth grade through
               college level (OIG 94-3504).

               A state university and eight school districts
               co-sponsored a science and math enrichment
               program that gives hands-on learning
               experiences to minority and disadvantaged
               students in grades 4 through 12 in rural
               communities. Another program at this
               university sponsors Native American
               undergraduate students in mentored marine
               science research projects (OIG 95-3501).

          During our program reviews, we did not find any major
          problems regarding institutional implementation of NSF's
          awards for research and education in science and
          engineering. Inspections in specific cases revealed
          adequate to commendable research facilities
          infrastructure, and good to excellent faculty/student

Four Most Recent Inspections

We assessed compliance and performance based on NSF's awards to PIs
at a state university; a private, technical institute; and two
primarily undergraduate institutions.

Inspection at a State University
in the Pacific Northwest

This inspection was based on nine grants that NSF's Directorate for
Geosciences (GEO) awarded to five PIs in the University's College
of Oceanic and Atmospheric Sciences (COAS).  Six of these awards
were for basic research in different areas of oceanographic
science, one was an instrumentation grant, one was a Research
Experiences for Undergraduates site grant, and one supported
research experiences in marine sciences for Native American and
Alaskan Native undergraduates. We also visited an NSF-owned
scientific research vessel that is operated by the University and
is shared with the scientific community through the
University-National Oceanographic Laboratory System. The COAS
facilities were well-maintained and were available to the entire
research community.

We found no major financial deficiencies. The University generally
complied with NSF's and other federal award requirements. We did
make some compliance and internal control recommendations to
improve controls, assurances, and approval of expenditures involved
with budget changes, participant support costs, travel, and usage
rates for specialized services.  Generally, the University's
response indicated its preference to delegate responsibility to the
operating level, but it did agree to clarify, and/or remind
personnel of, regulations and procedures. It also agreed to
document University approvals, such as those involved with
significant budget changes.

The University agreed with our recommendations to clarify and add
flexibility to its procedures for handling allegations of
misconduct in science. The University stated it will specify
preponderance of the evidence as a standard of proof in its
procedures and will change its procedures so that it could proceed
directly to an investigation without duplicating an inquiry
conducted by a federal agency, but it will reserve the right to
conduct a second inquiry if it deems that one is necessary. The
University also revised its policy on grant research records to
indicate that the University must have access to such records
including those research records that accompany PIs who permanently
leave the University.

As a result of this inspection, NSF's Assistant Director for
Geosciences agreed to formalize GEO's preproposal process, which up
to now has not operated with written procedures.

Inspection at a Private, Technical
Institution in the Northeast

This inspection was based on nine research grants that two
divisions in NSF's Engineering Directorate awarded to six PIs in
the Institution's Department of Chemical Engineering.  These
included a Presidential Young Investigator award and a Small Grants
for Exploratory Research award.

We found no major financial deficiencies during this inspection.
Our financial compliance review noted some areas of noncompliance
and internal control weaknesses regarding obtaining and/or
documenting approval of travel expenditures and changes to budget
items in grants, as well as effort reporting and procurement.  The
Institution agreed to strengthen internal controls for travel and
effort reporting but maintained that it was already complying with
procedures for approval of budget changes and procurement.

Our management and administrative compliance review noted some
weaknesses in the Institution's policies for misconduct in science
and the ownership and retention of research data.  We also raised
questions about laboratory safety. In addition, the Institution
stated that it intended to emphasize to faculty members the need to
protect the confidentiality of NSF proposals they receive for
review, particularly regarding not sharing proposals with graduate
students or others unless the NSF program officer's permission has
been obtained.

The Institution stated that our recommendations about its
misconduct policies and procedures and the issue of standards for
the recording and retention of data will be addressed.  The
Institution explained its safety procedures in some detail and
assured us that they meet regulatory standards.  NSF's Engineering
Directorate agreed to revise its letter to proposal reviewers to
ensure the confidentiality of research proposals.

Inspection at a Private,
Primarily Undergraduate College

This was our first inspection at an undergraduate, liberal arts
college. The 13 grants reviewed during this inspection support
undergraduate science education by providing instructional
laboratory instruments, encouraging research careers for minority
students, developing courses to enhance the science content for
Kindergarten-12th grade teachers, and by partially paying for the
renovation of academic laboratories. NSF's Education and Human
Resources (EHR) Directorate made 12 grants, and NSF's Office of
Science and Technology Infrastructure made 1 award for renovating
the college's behavioral research facilities. The PIs for these
awards were members of the departments of biology, chemistry,
education, environmental sciences, geology, physics, and

The college generally complied with NSF's and other federal award
requirements. In reviewing the renovation grant, we found that the
college did an excellent job of ensuring compliance with federal
regulations on construction contracts. The college agreed with our
recommendation that it establish time and attendance records to
support the faculty members' salaries charged to NSF grants, as
well as other recommendations to improve compliance and strengthen
the college's internal control structure.

In response to our recommendations, the college is finalizing and
plans to distribute its policy on misconduct in science. Also, in
response to our recommendation the college has issued a written
policy on retention of, and access to, research records produced
under federal awards.

Based on information obtained from our review of award
documentation and from the college, we recommended that NSF's
Assistant Director for EHR review operations in three programs to
ensure compliance with NSF requirements for proposal and award
administration. For a continuing award in one of these programs, we
also recommended a review of the timeliness of program funding
decisions and the promptness with which those decisions are
communicated to PIs and institutions.

EHR's Assistant Director responded that he plans to draw staff
members' attention to the requirements for proper organization of
award files and prompt filing of all official award documentation.
He also stated that the cognizant program, based upon a strategy
developed by staff members and the PI, will take final action
during FY 1995 on the delayed funding of the continuing award.

Inspection at a Small,
Historically Black College

This inspection was based on six grants awarded to a primarily
undergraduate, minority University. The grants covered in this
inspection were aimed at improving minority students' access to
research and research careers or at systemically reforming
elementary and middle school science education. NSF's Directorate
for Geosciences, through its Oceanographic Facilities Program,
awarded two of the grants, which were designed to increase minority
careers in aquatic sciences.  We believe that the program developed
under these two awards could serve as a recruitment model for other
disciplines. Essentially, the program enables undergraduate
students to attend, and actively participate in, professional
scientific meetings. NSF's EHR awarded four of the grants: two for
teacher enhancement, one for research improvement at a minority
institution, and one for instrumentation and laboratory improvement

The University generally complied with NSF's and other federal
award requirements. The University agreed to correct the immaterial
instances of noncompliance and weaknesses in its internal control
structure that we noted in our financial review.

The University also agreed with our recommendations to review its
policy and procedures for misconduct in science to clarify its
terminology, review its definition of misconduct in science, ensure
that its policy would meet the requirements of NSF's misconduct
regulation, and ensure all PIs and NSF-supported students
understand that NSF's regulation would apply to them.

The University agreed with our recommendation to establish a
written policy about retention of, and access to, research records
produced under federal awards.

We recommended that NSF's Assistant Director for EHR consider the
impact that the broad latitude PIs are given for equipment
substitution under ILI grants has on NSF program managers' ability
to monitor the appropriate use of NSF funds, and assess the success
of the directorate's preproposal system with an eye toward
informing other directorates about this system.

NSF's Assistant Director for EHR responded that the policy
regarding substitute equipment adequately reflects NSF policy and
that EHR believes it is the university's responsibility to ensure
that this policy is appropriately followed. EHR stated that it will
continue to monitor the efficacy of the preproposal system in EHR
and that EHR would be pleased to share information about the use of
proposals with other NSF units as appropriate.


OIG attorneys provide legal advice on all OIG activities, including
investigations, audits, and oversight of NSF's functions and
programs.  OIG attorneys supported many of the activities that are
described in other sections of this report.

Under section 4(A)(2) of the Inspector General Act, OIG is required
to review and make recommendations concerning legislation and
regulations that affect NSF and NSF-funded activities.  OIG
attorneys are responsible for conducting these reviews as well as
general oversight of NSF's legal activities.

Conflicts Rules for IPAs

NSF uses the Intergovernmental Personnel Act to obtain the services
of many scientists (IPAs). NSF currently has 146 IPAs who function
as program officers, division directors, and assistant directors.
Although IPAs are covered by criminal, conflict-of-interest
statutes, they are not covered by the government's financial
disclosure requirements or the standards of ethical conduct that
apply to permanent federal employees (5 C.F.R. part 2635).

NSF requests that IPAs disclose their financial interests on the
same forms used by permanent federal employees.  If an IPA refuses
to file a disclosure form, provides false information on the
disclosure form, or violates the standards of ethical conduct
required of permanent federal employees, NSF's ability to pursue
administrative action is limited.

In our view, NSF needs to promptly implement an explicit means of
enforcing standards of ethical conduct  for IPAs that extends
beyond the narrow parameters of criminal rules. Accordingly, we
recommended that NSF develop and implement a contractual agreement
that requires that IPAs file financial disclosure forms appropriate
to their NSF position and comply with the standards of ethical
conduct set forth in 5 C.F.R. part 2635. We also recommended that
the contractual agreement formally notify IPAs that NSF may take
disciplinary and/or corrective actions for violations of ethical
standards.  We expect to report on NSF's response to our
recommendations in our next semiannual report.

Selection of Graduate Research Fellows

We conducted a limited review of the selection process used by the
Graduate Research Fellowship Program (GRFP).  The purpose of our
review was to determine whether GRFP's selection procedures
discriminated against women in fields of study where there are more
female applicants than male applicants.

The GRFP awards fellowships to graduate students who have been
identified as having exceptional promise as future scientists,
mathematicians, and engineers.  NSF's Division of Graduate
Education and Research Development administers the GRFP and sets
out the decision rules governing the selection process each year.
Although merit is the primary selection factor, the selection
process is complex, considering a number  of criteria, including
geographic region, gender, and field of study.

Overall, the selection procedures improve the representation of
women amongst awardees, including in those fields with high
percentages of female applicants.  Sometimes, the procedures result
in sizable and unpredictable variations in the representation of
female awardees in each field of study.  However, we found no
discrimination against female applicants in any field of study.


     NSF Declines to Further Clarify PI Time and Effort Commitment.

In Semiannual Report Number 9 (page 40), we discussed our
recommendation that NSF amend the guidance provided to applicants
for NSF grants to include an unambiguous explanation of level of
efffort.  At that time, the NSF proposal form asked applicants to
provide information on the "level of effort" committed by the PIs
and other key personnel, but there was no definition of "level of
effort."  It was our view that, to assess an applicant's ability to
perform the proposed work, NSF program officers must have
reasonably accurate information on the present and proposed time
commitments of the PIs and other key personnel.  NSF responded to
our recommendation by replacing "level of effort" with
"person-months," but again with no definition of that expression.
We felt that the new expression was ambiguous, and we recommended
that NSF define it.  Specifically, we suggested that the definition
clarify that no single person can commit to expending more than 1
person-month in any calendar month.  After consultation with the
Division of Grants and Agreements, the Contracts and Policy Office,
and other relevant operating units, NSF's Deputy Director
determined that the term "person months" was well-understood and
sufficiently precise to accomplish NSF's purposes.  NSF plans no
further clarification of the language.

     NSF Amends Financial Disclosure Policy for PIs.  In Semiannual
Report Number 11 (page 40), we discussed NSF's publication of a
final financial disclosure policy for PIs.  NSF worked with the
Department of Health and Human Services (HHS), the Office of
Science and Technology Policy, and OMB to coordinate the
development of HHS' final PI financial disclosure policy.  The
effective date of NSF's policy, which was previously set for
June 28, 1995, will be delayed to coincide with the effective date
of HHS' policy, which has not yet been determined.

     NSF's Response to HHS' Misconduct Determinations.  As
discussed in Semiannual Report Number 9 (page 38), HHS now publicly
disseminates the identities of persons it finds to have committed
misconduct in science.  We mentioned two issues for NSF that arose
from HHS' action:  (1) What, if anything, should NSF do if an
individual who applies to NSF for an award has been found by HHS to
have committed misconduct in science but against whom HHS did not
apply a government-wide sanction? and (2) Should NSF actively
disseminate the identities of individuals that NSF finds to have
committed misconduct in science?  We asked that the Director
consult with the Office of General Counsel ". . . to obtain
guidance on what actions--if any--NSF should take with regard to
the individuals who were the subject of these non-disbarment HHS
misconduct cases. . ."  During this reporting period, NSF's Deputy
Director informed us that, following the suggested consultation, it
was determined that no further action was necessary.


We are responsible for reporting to Congress and following up on
the resolution of audit recommendations.  From October 1, 1994,
through March 31, 1995, NSF resolved 19 reports with significant
audit recommendations.

Commercial Firm Earns
Interest on NSF Funds

Period First Reported:  October 1, 1990 - March 31, 1991

NSF awarded two grants totaling $2,225,496 to a privately owned,
for-profit corporation that provides technical and scientific
information to commercial television stations.  The corporation
claimed $2,113,620, and we questioned $410,338 because the
corporation charged unsupported salary costs to the grant, did not
make invoices supporting expenditures available, and charged
indirect costs at a rate higher than the actual or maximum
provisional rate.  We recommended that the corporation return to
NSF an  additional $21,175 in interest earned on NSF advances.

NSF negotiated a final settlement with the corporation, which
requires that the corporation repay NSF $129,264.

Museum of Science and Industry

Period First Reported:  April 1, 1993 - September 30, 1993

NSF awarded over $1.3 million to a not-for-profit museum to support
construction of a new exhibit.  NSF made the award with the
expectation that the grantee would cost share approximately $3.7
million of the project's total costs.  As of the date of the audit,
the museum had not provided its part of the cost sharing.  The
grantee claimed $150,777 against the NSF award, and we questioned
$29,389.  NSF disallowed $8,274 of the questioned costs.

Antarctic Program

Period First Reported:  April 1, 1993 - September 30, 1993

NSF awarded a 6.5-year, cost-plus-award-fee contract to ASA to fund
research activities and operations as well as maintain facilities
and equipment at sites in Antarctica.  ASA claimed approximately
$169 million.  We questioned $652,352 because inadequate, and in
some cases, no documentation was provided to support claimed costs
related to equipment, travel, and other services; reimbursement for
travel in personal automobiles was not always justified;
documentation on the use of foreign-flag air carriers was not
maintained; and payment made by ASA for services rendered by its
two parent companies was not supported by adequate documentation or
a contractual  agreement to be used to determine the reasonableness
of the billed costs.

We also noted the following compliance and internal control
deficiencies:  ASA did not notify NSF before it made changes,
totaling $148,000, to a subcontract; formal policies and procedures
related to the use of foreign-flag air carriers and cash drawdowns
were not developed; and appropriate approval was not obtained to
change the level of ASA's liability insurance.  NSF disallowed
$50,665 of the questioned costs.

Vanderbilt University

Period First Reported:  April 1, 1993 - September 30, 1993

NSF's Division of Physics awarded Vanderbilt University five grants
totaling $2,028,300.  The University claimed $1,933,467, and we
questioned $82,507.  Questioned costs resulted from personnel
activity reports that were incomplete; costs that were incurred
before the effective dates of the preaward periods; travel costs
that were not supported; and indirect costs that were incorrectly
charged against equipment.  We also found that cost and price
analyses were not always documented, property records were
incomplete, and a system to monitor cost sharing was not
maintained.  NSF disallowed $51,143, of which $41,101 is to be
repaid and $10,042 in unclaimed costs is to be used to offset
questioned costs.

Catholic University

Period First Reported:  April 1, 1993 - September 30, 1993

NSF's Division of Physics awarded Catholic University four grants
totaling over $1.6 million.  The University claimed $1,499,353, and
we questioned $41,244 because salaries were not supported by
personnel activity reports; expenditures were not supported by
documentation; tuition was charged when graduate students were not
working on the awards; and indirect costs were incorrectly charged
against equipment and tuition.  We also found that equipment was
not tagged, physical inventories were not performed, and a system
was not maintained to monitor cost sharing.  NSF required that the
University repay $15,168.

American University

Period First Reported:  April 1, 1993 - September 30, 1993

NSF's Division of Physics awarded American University four grants
totaling $2,629,736.  The University claimed $2,037,474, and we
questioned $543,755 because salaries, wages, and tuition costs were
not supported by personnel activity reports and participant support
costs were not tracked in the University's accounting system.  In
addition, there was no written documentation to support price and
cost analyses, including competition for purchases of $10,000 or
more, or sole source vendor selection.  NSF disallowed $86,139 and
has requested payment.

For-Profit Company Claims
Ineligible and Unsupported Costs

Period First Reported:  October 1, 1993 - March 31, 1994

NSF granted $260,000 to a for-profit company to develop electronics
equipment under a Phase II SBIR award.  The company claimed
$91,427, and we questioned $41,427 because salaries and wages,
travel costs, and subcontract costs were not supported.  The
company also claimed ineligible indirect costs.  NSF disallowed
$41,427.  The grantee has appealed this decision.

Nonprofit Educational Corporation
Cannot Locate Equipment Charged to Award

Period First Reported:  October 1, 1993 - March 31, 1994

NSF awarded $562,624 to a nonprofit corporation to support the
development of a national science education conferencing network.
The corporation claimed $562,624, and we questioned $98,308 because
the grantee could not locate the equipment claimed as purchased
under the grant and did not provide adequate support for other
costs claimed.  NSF disallowed $9,530, which the corporation has

Small Business Overclaims Indirect Costs

Period First Reported:  October 1, 1993 - March 31, 1994

NSF awarded two grants totaling $356,117 to a for-profit
corporation to assist in the development of computer software
models that aid in the performance evaluation of complex
manufacturing systems.  The grantee claimed $356,045, and we
questioned $15,596 because actual indirect cost rates were lower
than those claimed, and claimed costs were not supported.  NSF
disallowed $4,248.  NSF and the corporation have agreed on a
repayment schedule.

Costs Questioned in Connection
With a Science and Math Award

Period First Reported:  October 1, 1993 - March 31, 1994

NSF awarded three grants totaling $1,123,562 to a nonprofit
association to use a national research laboratory's facilities,
personnel, and  equipment to develop ways of enhancing precollege
science and mathematics education.  The association claimed
$1,100,979, and we questioned $61,391 of direct costs claimed under
the grants and $323,944 of indirect costs claimed in the
association's indirect cost pools.  NSF disallowed $26,679.  NSF
allowed $2,925 in offsets with $23,754 to be repaid.

SBIR Company Overclaims Indirect Costs

Period First Reported:  October 1, 1993 - March 31, 1994

NSF awarded $250,000 to an SBIR company to develop new materials to
use as part of biosensors.  The company claimed $250,000, and we
questioned $9,826 because claimed indirect costs exceeded allowable
amounts.  NSF disallowed $9,826.

Review of Grant for the
Development of Elementary Curriculum

Period First Reported:  October 1, 1993 - March 31, 1994

NSF awarded a $2,208,868 grant to a nonprofit organization to
support the development of a hands-on, elementary science
curriculum.  We questioned $35,813 because the grantee used NSF
funds to reimburse NSF for costs questioned in a prior audit, time
sheets did not support claimed costs, costs were charged for
expenditures incurred after the award expired, and claimed costs
were not supported by adequate documentation.  NSF requested that
the grantee repay $20,076.

Museum Improperly
Charges Costs

Period First Reported:  October 1, 1993 - March 31, 1994

NSF provided four awards to support scientific exhibits and a
science carnival. The museum claimed $522,357, and we questioned
$22,950 because claimed costs exceeded actual expenditures; salary
costs were based on rates or time and effort reports that were not
properly approved; and there were improperly charged supplies,
computer hardware, and advertising costs.  NSF disallowed $21,123.

Engineering Research Centers and
Science and Technology Centers

Period First Reported:  April 1, 1994 - September 30, 1994

In reviews of two Engineering Research Centers and four Science and
Technology Centers, we questioned claimed costs of $1,300,000
($740,000 in cost sharing and $560,000 in cost reimbursement).
During this reporting period, NSF disallowed all of the questioned
cost sharing amounts and required that the Centers provide
additional project support in the amount disallowed.  NSF also
disallowed $367,721 of the questioned reimbursements and required
that the Centers remove those claimed costs from the NSF awards;
charge their own accounts for those changes; and make appropriate
adjustments to their books, records, and reports to NSF.


This section identifies audit reports where management has not made
a final decision on the corrective action necessary for report
resolution within 6 months of the report's issue date.  CPO is
tasked with making management's decision concerning external audit
reports.  At the end of the reporting period, there were 10 audit
reports with questioned costs that were not resolved.  There were
24 reports over 6 months old requiring final resolution decisions
at the end of the last reporting period.

Management Decision:  Management's evaluation of audit findings
and recommendations and issuance of a final decision concerning
management's response to such findings and recommendations.


Report                                                 Date Report
Number                   Title                              Issued

Reports with questioned costs:

94-1017             American Express Travel            03/04/94

94-1019             Draco Technology                   03/14/94

94-1038             Aurora Flight
                    Sciences Corporation               08/08/94

94-1046             Apeldyn Corporation                09/08/94

94-1050             Southern Connecticut
                    State University                   09/13/94

94-1055             Dames & Moore                      09/28/94

94-1065             University Consortium
                    for Atmospheric Research           09/30/94

94-1067             Better Education, Inc.             09/30/94

94-1070             Chemludens                         09/30/94

94-1072             Decision Development
                    Corporation                        09/30/94

Travel Services Provider Fails
to Follow Contract Requirements

Period First Reported:  October 1, 1993 - March 31, 1994

The Division of International Programs awarded a 4-year,
$5.8-million contract to a travel services provider to arrange for
international travel for U.S. scientists traveling abroad and
foreign scientists traveling to the United States.

The contractor claimed $1,559,147, and we questioned $48,787
because funds were expended on unauthorized or unallowable items,
travelers did not return excess funds, traveler's refunded amounts
were not returned to the NSF account, and claimed costs were not
supported by source documentation.  The contractor is providing
additional documentation. NSF expects to finalize negotiations
during the next reporting period.

SBIR Grantee Refuses to
Provide Final Project Report

Period First Reported:  October 1, 1993 - March 31, 1994

NSF awarded a $199,335 grant to a private, for-profit business to
develop a suspension core drill that will maximize drilling speeds.
The grantee claimed $193,102, and we questioned $52,976 because the
grantee did not provide adequate documents to support indirect
costs.  NSF received the necessary documentation from the grantee
and is resolving the procedural findings.  Resolution is expected
during the next reporting period.

For-Profit Claims Unallowed Expenses

Period First Reported:  April 1, 1994 - September 30, 1994

NSF awarded two grants totaling $797,589 to a for-profit
organization to develop unmanned aircraft to conduct research on
changes in the global climate.  The organization claimed $551,626,
and we questioned $207,482 because the grantee charged $32,024 for
cost overruns (salaries and fringe-benefit costs) from a non-NSF
contract; $86,277 in equipment, consultant, travel, and other
direct costs that were not approved in the award budgets; and
$89,181 in indirect costs that were not applicable to the awards.

The organization is providing additional documentation, and
resolution is expected before September 30, 1995.

Audit of a Federally Funded Research
and Development Center Identified
the Possibility of Substantial Cost Savings

Period First Reported:  April 1, 1994 - September 30, 1994

NSF provides approximately $50 million per year to support the
National Center for Atmospheric Research.  We identified $800,000
that could be saved in negotiating the 1995 indirect cost rate
proposal.  We also made recommendations addressing internal control
and compliance deficiencies in the areas of timecard certifications
for administrative employees; unauthorized journal entries in the
accounting records; and excessive per diem amounts paid for certain
travel claims.

NSF is negotiating with the Center on these issues.  Resolution is
expected during the next reporting period.

For-Profit Corporation Claims
Ineligible and Unsupported Costs

Period First Reported:  April 1, 1994 - September 30,1994

NSF awarded a $249,960 grant to a for-profit corporation to
investigate coherent fiber-optic communication systems.  The
grantee claimed $94,883, and we questioned $19,820 because salaries
and wages, travel costs, materials and supplies, and subcontract
claimed costs were ineligible for reimbursement or unsupported.  We
also suspended $9,082 in indirect costs until the grantee
calculates an indirect cost rate for the year ended December 31,
1993, to support its claimed indirect costs.  We also found that
the grantee did not have an adequate financial management system
and failed to notify NSF of equipment purchases.

The corporation requested and received an extension for submitting
the requested documentation.  Resolution is expected by
September 30, 1995.

Southern Connecticut
State University

Period First Reported:  April 1, 1994  -  September 30, 1994

NSF awarded Southern Connecticut State University four grants
totaling $316,036.  The University claimed $275,434, and we
questioned $151,969.  Questioned costs resulted from participant
support costs that were spent in other cost categories without
NSF's prior approval.  In addition, the University maintained
insufficient documentation to support its cost sharing
contributions and the expenditure of funds on the grant-funded
program.  Our review of internal controls and compliance issues
also disclosed that payroll costs were not properly allocated
between departments; time sheets were incomplete; and duties within
the University's payroll department were insufficiently segregated.
NSF expects to resolve these issues in the next reporting period.

For-Profit Corporation
Claims Unsupported Costs

Period First Reported:  April 1, 1994 - September 30, 1994

NSF awarded a for-profit corporation 11 grants totaling $749,965.
The grantee claimed $712,951, and we questioned $11,267.  We
questioned costs because vendor invoices were not provided to
support travel, consultant, computer, and publication costs.  The
grantee has promised supporting documentation. NSF expects to
resolve these issues in the next reporting period.

Grantee Overclaims
Indirect Costs

Period First Reported:  April 1, 1994 - September 30, 1994

NSF awarded a $317,800 grant to a for-profit organization to
investigate, and provide data on, the benefits of classroom
communications systems in various educational environments.  The
grantee claimed $297,550, and we questioned $17,563.  We
questioned costs because participant support costs were spent in
other cost categories without NSF's prior approval; the grantee
claimed unallowable costs; the grantee charged indirect costs as
direct costs and claimed the incorrect amounts as indirect costs;
and the grantee did not remit to NSF interest  earned  on  cash
advances.   We also classified $48,115 in indirect costs as
unresolved because the grantee did not have an indirect cost rate
proposal prepared for 1993.  We found that cash advances were
obtained in excess of cash needs; NSF funds were not deposited into
interest bearing accounts; property records were not maintained or
submitted to NSF; and the grantee's policies and procedures did not
require that management review travel claims for cost allowability.

The grantee has promised data supporting the indirect cost
negotiations.  NSF expects to resolve these issues during the next
reporting period.

Small Business Claims Indirect
Costs as Direct Costs

Period First Reported:  April 1, 1994 - September 30, 1994

NSF awarded a $253,356 grant to a for-profit organization under
NSF's SBIR program.  The grantee claimed $140,931, and we
questioned $72,952 because the grantee claimed indirect costs as
direct costs; purchased equipment without NSF's prior written
approval; and charged salary costs at a rate higher than proposed
in the grant budget.  We found that cash advances were requested
that exceeded 1-month's needs; interest earned on cash advances was
not remitted to NSF; a progress report was not promptly submitted;
indirect and direct costs were not properly identified and
segregated in the accounting records; and accounting duties were
not adequately segregated.  The grantee has agreed to provide
supporting information by the end of April 1995.  NSF expects to
resolve these issues by June 30, 1995.

For-Profit Organization
Claims Improper Costs

Period First Reported:  April 1, 1994 - September 30, 1994

NSF awarded a $737,232 grant to a for-profit organization that
publishes educational software.  The grantee claimed $343,869, and
we questioned $209,585.  We questioned costs because the grantee
claimed unallowable, unsupported, unallocable, and duplicate costs
and did not remit interest earned on cash advances to NSF. We found
that the grantee did not have an adequate financial management
system; requested cash advances that exceeded its current needs;
and did not segregate unallowable costs from costs claimed.
Negotiations between NSF and the organization are underway.  NSF
expects to resolve these issues before September 30, 1995.

Agency Refusal To Provide
Information Or Assistance

During this reporting period, there were no reports made to the
National Science Board of instances where information or
assistance, requested under section 5(a)(5) of the Inspector
General Act of 1978, as amended, was unreasonably refused or not

Significant Management Decisions
That Were Revised

No significant management decisions were revised during the
reporting period.

Inspector General's Disagreement
With Significant Management Decisions

The Inspector General has no disagreement with significant
management decisions made during this reporting period.


We issued the following audit reports during this reporting period.
Where applicable, the total dollar value of questioned costs
(including a separate category for the dollar value of unsupported
costs) is listed for each report.

NSF and CPA Performed Audits

                              Report    Questioned     Unsupported
Number    Grantee             Issued         Costs           Costs

95-1001   Key Curriculum
          Press               11/04/94        7,547          2,763

95-1002   West Virginia
          University          11/09/94       63,031              0

95-1003   Joint Oceanographic
          Institutions, Incorporated,
          Overseas Drilling
          Limited             11/29/94       43,297         43,297

95-1004   Phoenix Systems,
          Inc.                11/29/94       12,091            875

95-1005   McLean Media        11/29/94        8,982          8,982

95-1006   Joint Oceanographic
          Institutions, Inc.  11/29/94       80,391          1,520

95-1007   Meeting the Challenge,
          Inc.                12/05/94            0              0

95-1008   IntelliGenetics,
          Inc.                12/05/94       17,102              0

95-1009   American Society of
          Biochemistry and
          Molecular Biology   01/04/95            0              0

95-1010   University Corporation
          for Atmospheric
          Research            01/04/95          300              0

95-1011   History Associates,
          Inc.                01/31/95        1,586          1,586

95-1012   Policy Studies
          Associates, Inc.    01/31/95        3,871            572

95-1013   Phoenix Systems,
          Inc.                01/31/95            0              0

95-1014   History of Science
          Society             02/06/95        4,409          1,051

95-1015   Transitions Research
          Corporation         02/06/95        4,507             42

95-1016   Crisis Management
          Corporation         02/06/95        3,710              0

95-1017   Science Skills
          Center              02/17/95      525,306         21,242

95-1018   Antarctic Support
          Associates          02/22/95            0              0

95-1019   American Society for
          Photogrammetry and
          Remote Sensing      02/22/95       58,816            629

95-1020   Lassen Research     03/01/95       12,732         12,732

95-1021   Hone Productions
          (KQED,, Inc.)       03/01/95       54,983         42,258

95-1022   BBN Systems and
          Corporation         03/06/95       122,067             0

95-1023   California Bio-Marine
          Corporation         03/06/95        7,536              0

95-1024   Creative
          Enterprises         03/06/95       16,341         11,837

95-1025   KJS Associates,
          Inc.                03/06/95       13,582            532

95-1026   Aerodyne Research,
          Inc.                03/06/95       17,521              0

95-1027   BioWest Research    03/06/95        2,345              0

95-1028   General Atomics     03/27/95    2,933,428      1,055,634

95-1029   BIOSYS Technologies,
          Inc.                03/27/95       83,964          7,239

95-1030   TCI Software
          Research, Inc.      03/27/95        6,541          6,541

95-1031   Marine Science Society
          of the Pacific
          Northwest           03/27/95       87,096         87,014

95-1032   Semiconductor Research
          Corporation         03/27/95            0              0

95-1033   National Astronomy
          and Ionosphere
          Center              03/27/95        1,532              0

95-1034   MicroMed Systems,
          Inc.                03/27/95          276              0

95-1035   Unicon Research
          Corporation         03/27/95          958            958

95-1036   Quest Structures    03/27/95            0              0

95-1037   MacConnell
          Research            03/27/95          324              0

95-1038   EQE International,
          Inc.                03/27/95        4,984            821

95-1039   Rowe-Deines
          Instruments, Inc.   03/27/95       58,437             58

95-1040   Innova Laboratories,
          Inc.                03/27/95       23,771              0

95-1041   University of
          Chicago             03/27/95        7,386              0

95-1042   The Mr. Wizard
          Foundation          03/31/95      157,780              0


                              Report    Questioned     Unsupported
Number    Grantee             Issued         Costs           Costs

95-2101   NSF's 1994 Donations
          Account Financial
          Statements          03/24/95            0              0

95-2102   Review of EDP Controls
          in the FAS          03/31/95            0              0

95-2103   Review of NSF
          Property Management 03/31/95            0              0

95-2104   Review of NSF General
          Ledger Accounts     03/31/95            0              0


                              Report    Questioned     Unsupported
Number    Grantee             Issued         Costs           Costs

95-4001   Southwest Museum
          ('93)               10/21/94            0              0

95-4002   The New York
          Botanical Garden    10/21/94            0              0

95-4003   Southwest Museum
          ('92)               10/21/94            0              0

95-4004   World Media
          Foundation, Inc.    10/21/94            0              0

95-4005   National Council
          for the Social
          Studies             11/14/94        6,544          6,544

95-4006   American Statistical
          Association         11/29/94            0              0

95-4007   The National Association
          of Biology Teachers,
          Inc.                11/29/94            0              0

95-4008   Incorporated Research
          Institutions for
          Seismology          11/29/94            0              0

95-4009   Sea Educational
          Association, Inc.   11/29/94            0              0

95-4010   Biological Sciences
          Curriculum Study    11/29/94            0              0

95-4011   Corporation for
          National Research
          Initiatives         11/29/94            0              0

95-4012   Center for American
          Archeology          11/29/94            0              0

95-4013   Museum of Science   11/29/94            0              0

95-4014   Association of
          Geographers         11/29/94            0              0

95-4015   Joint Oceanographic
          Institutions, Inc.  12/05/94            0              0

95-4016   Santa Barbara Museum
          of Natural History  12/05/94            0              0

95-4017   New York Hall
          of Science          12/05/94            0              0

95-4018   XXVII International
          Congress            01/17/95            0              0

95-4019   Monterey Bay
          Aquarium Research
          Institute           01/23/95            0              0

95-4020   Boyce Thompson
          Institute for
          Plant Research,
          Inc.                01/23/95            0              0

95-4021   Canyon Ferry
          Limnological Institute,
          Inc.                01/23/95          645            645

95-4022   College-University
          Resources Institute,
          Inc.                01/23/95            0              0

95-4023   National Bureau of
          Economic Research,
          Inc.                01/23/95            0              0

95-4024   Quality Education
          for Minorities
          (QEM) Network       01/23/95          595              0

95-4025   Science Museum
          of Minnesota        01/23/95            0              0

95-4026   Ventures in
          Education           01/23/95            0              0

95-4027   Canyon Ferry
          Institute, Inc.     01/23/95            0              0

95-4028   American Association
          of Community
          Colleges            02/06/95       12,657         12,657

95-4029   American Mathematical
          Society             02/06/95          430            430

95-4030   Ann Arbor Hands-on
          Museum ('91)        02/06/95            0              0

95-4031   Ann Arbor Hands-on
          Museum ('92)        02/06/95            0              0

95-4032   Applied Technology
          Council             02/06/95            0              0

95-4033   Connecticut Business
          & Industry
          Association         02/06/95            0              0

95-4034   Farnet, Inc.        02/06/95            0              0

95-4035   Institute for Research
          on Learning         02/06/95        2,400              0

95-4036   Marine Environmental
          Sciences Consortium 02/06/95          150              0

95-4037   Minnesota Private
          College Research
          Foundation          02/06/95            0              0

95-4038   PATHS/PRISM         02/06/95            0              0

95-4039   Somerset/Hunterdon
          Business and
          Education Partnership,
          Inc. ('92)          02/06/95            0              0

95-4040   Somerset/Hunterdon
          Business and
          Education Partnership,
          Inc. ('93)          02/06/95            0              0

95-4041   The Tech Museum of
          Innovation ('93)    02/06/95            0              0

95-4042   The Tech Museum of
          Innovation ('92)    02/06/95            0              0

95-4043   The Cleveland
          Foundation          02/06/95       15,090              0

95-4044   The Exploratorium   02/06/95            0              0

95-4045   Cooperating School
          Districts of the
          St. Louis Suburban
          Area, Inc.          02/06/95            0              0

95-4046   American Society of
          Civil Engineers     02/22/95            0              0

95-4047   The Children's
          Museum              02/22/95          745            745

95-4048   Decision Science
          Research Institute,
          Inc.                02/22/95            0              0

95-4049   Consortium for
          Mathematics and
          its Applications    02/22/95            0              0

95-4050   National Council
          of Teachers of
          Mathematics         02/22/95            0              0

95-4051   Minnesota Environmental
          Sciences Foundation,
          Inc.                02/22/95            0              0

95-4052   Community Television
          of Southern California
          ('94)               02/22/95            0              0

95-4053   Community Television
          of Southern California
          ('93)               02/22/95            0              0

95-4054   Nysernet, Inc.      02/22/95            0              0

95-4055   American Geographical
          Institute           02/22/95            0              0

95-4056   American Institute
          of Physics          02/22/95        3,270          1,000

95-4057   Kentucky Science
          and Technology
          Council, Inc.       02/22/95            0              0

95-4058   Technical Education
          Research Centers,
          Inc.                02/22/95            0              0

95-4059   Bigelow Laboratory
          for Ocean Sciences
          ('94)               03/01/95            0              0

95-4060   Bigelow Laboratory
          for Ocean Sciences
          ('93)               03/01/95            0              0

95-4061   Educational Equity
          Concepts, Inc.      03/01/95            0              0

95-4062   Illinois State
          Museum Society      03/01/95            0              0

95-4063   Archbold Expeditions-
          Archbold Biological
          Station             03/06/95            0              0

95-4064   Science Museum of
          Minnesota           03/06/95            0              0

95-4065   The American Museum
          of Natural History  03/06/95            0              0

95-4066   Denver Museum of
          Natural History     03/06/95            0              0

95-4067   The Mathematical
          Association of America,
          Inc.                03/06/95            0              0

95-4068   Society for the
          History of
          Technology          03/06/95            0              0

95-4069   Woods Hole
          Institute           03/06/95            0              0

95-4070   Astrophysical
          Consortium          03/27/95            0              0

95-4071   Austin Children's
          Museum              03/27/95            0              0

95-4072   Los Angeles County
          Museum of Natural
          History Foundation  03/29/95            0              0

95-4073   International Society
          for Photogrammetry &
          Remote Sensing XVII
          Congress            03/30/95        9,043              0


We processed 500 reports provided by other federal agencies.  Those
reports included audit coverage of the NSF programs.  The following
reports contained questioned costs that required NSF followup.

                              Report    Questioned     Unsupported
Number    Grantee             Issued         Costs           Costs

95-5007   The American
          University ('92)    01/31/95            17             0

95-5013   Bowdoin College     01/31/95         9,495         9,495

95-5056   University of
          Michigan            02/01/95         2,931             0

95-5063   Buena Vista
          College             02/06/95        36,859             0

95-5065   University of
          Michigan            02/10/95        98,834             0

95-5206   State of
          Delaware            02/23/95         1,045             0

95-5212   State of
          Washington          02/23/95         7,755         5,875

95-5318   Embry-Riddle
          University, Inc.    03/08/95         1,852             0

95-5325   Union College       03/08/95         1,610         1,550

95-5411   The American
          University          03/16/95           198           198

95-5424   Pennsylvania
          State University    03/16/95         1,343         1,343

95-5425   University of
          Notre Dame Du Lac   03/16/95        37,706         1,183

95-5451   Wright State
          University          03/20/95         5,812             0

95-5487   Colgate
          University          03/20/95             5             0

95-5492   William Marsh
          Rice University     03/20/95        34,182        33,699


Table I.   Audit Reports Issued With Questioned Costs

                                        Questioned     Unsupported
                              Number    Costs          Costs

A.  For which no management
decision has been made by
the commencement of the
reporting period.             82        6,719,903      3,685,164

B.  Which were issued during
the reporting period.         62        4,739,743      1,383,547

C.  Adjustments to questioned
costs resulting from resolution
activities.                    0                0              0

Subtotals of (A+B+C)         144       11,459,646      5,068,711

D.  For which a management
decision was made during
the reporting period.         85        6,095,984      3,275,127

     (i) dollar value of
     disallowed costs          0        2,136,156            N/A

     (ii) dollar value of
     costs not disallowed      0        3,959,828            N/A

E.  For which no management
decision has been made by
the end of the reporting
period.                       59        5,363,662      1,793,584

Reports for which no management
decision was made within
6 months of issuance.         10          792,401         25,049



Funds to be Put to Better Use:  Funds the OIG has identified in
an audit recommendation that could be used more efficiently by
reducing outlays, deobligating program or operational funds,
avoiding unnecessary expenditures, or taking other efficiency


Table II.  Audit Reports Issued With Recommendations For Better Use
of Funds

                                        Number         Dollar Value

A.  For which no management decision
had been made by the commencement of
the reporting period.                      1                800,000

B.  Recommendations that were issued
during the reporting period.  (These
were issued in two reports.)               7             10,600,000

Subtotals of A & B                         8             11,400,000

C.  For which a management decision
was made during the reporting period.      5              6,500,000

     (i)  dollar value of recommendations
     that were agreed to by management     5              6,500,000

          based on proposed
          management action                5              6,500,000

          based on proposed
          legislative action               0                     0

     (ii)  dollar value of recommendations
     that were not agreed to by
     management                            0                     0

D.  For which no management decision has
been made by the end of the reporting
period.                                    3              4,900,000

Report for which no management decision
was made within 6 months of issuance.      1                800,000


As required by the Inspector General Act of 1978, we provide tables
in each Semiannual Report to the Congress that give statistical
information on work conducted by our audit and investigation units.

Tables that provide statistics concerning these required
performance measures are on pages 22, 63, and 64.  Vice President
Gore's National Performance Review, GAO, and OMB have suggested
that Offices of Inspector General develop additional performance
measures that provide information about their activities.  As a
result, we developed an additional performance measure to
better explain the work of our office.

OIG staff members regularly conduct reviews of internal NSF
operations.  These reviews often result in systemic recommendations
that are designed to improve the economy and efficiency of NSF

We routinely track these systemic recommendations and report to
NSF's Director and Deputy Director quarterly about the status of
our recommendations.  The following table provides statistical
information about the status of all systemic recommendations that
involve NSF's internal operations.  The statistics demonstrate that
NSF management has, in general, agreed to resolve our systemic
recommendations in a reasonable manner.

Status of Systemic Recommendations
That Involve Internal NSF Management

Open Recommendations

Recommendations Open at the
Beginning of the Reporting Period                           54

New Recommendations Made During Reporting Period            37

Total Recommendations to be Addressed                       91

Management Resolution of Recommendations1

Recommendations Awaiting Management Resolution              17

Recommendations Resolved by Management                      74

     Management Agrees to Take Reasonable Action            91

     Management Decides No Action is Required                0

Final Action on OIG Recommendations2

Final Action Completed                                      52

Recommendations Open at End of Period                       39

[Footnote 1]  "Management Resolution" occurs when management
completes its evaluation of an OIG recommendation and issues its
official response identifying the specific action that will be
implemented in response to the recommendation.

[Footnote 2]  "Final Action" occurs when management has completed
all actions it has decided are appropriate to address an OIG

Aging of Open Recommendations

Awaiting Management Resolution:

          0 through 6 Months                                17

          7 through 12 Months                                0

          more than 12 Months                                0

Awaiting Final Action After Resolution:

          0 through 6 Months                                 6

          7 through 12 Months                                6

          13 through 18 Months                               0

          19 through 24 Months                               2

          more than 24 Months                                8

Recommendations Where Management Decides No Action is Required

None to report during this period.

Recommendations Awaiting Management Resolution for More Than 12

None to report during this period.

Recommendations Awaiting Final Action for More Than 24 Months

1.  In Report Number OAO-15-04-88, "Review of the NSF Computer
Security Program," April 15, 1988, we recommended that a risk
analysis for computer operations be performed and a contingency
plan consistent with published guidelines be developed.
Preparation of the contingency plan is anticipated to begin
shortly.  Although the delays in implementation were extensive, no
losses have resulted.  We consider the current action to be

2.  In a July 1, 1992, memorandum, we recommended that NSF enact an
amendment to bring NSF under the jurisdiction of the Program Fraud
Civil Remedies Act.  NSF prepared an amendment to the Act and
submitted it to the Congress on May 11, 1993.  The Congress did not
act on the proposed amendment.  The House and Senate staffs have
indicated support for the amendment and a willingness to consider
including it in suitable legislation when the opportunity arises.
NSF management will include this amendment in its FY 1996
legislative program.  We consider management's action to be

3.  In Report Number OIG 92-2112, "Review of FAR Requirements to
Evaluate Federally Funded Research and Development Centers,"
December 30, 1992, we recommended that guidelines be established
concerning the ownership of a telescope at an observatory in Chile.
Discussions continue, but a final decision is uncertain because of
sensitive international issues.  We consider management's action to
be reasonable.

4.  In our Review of NSFNET, March 23, 1993, concerning the
management control of the National Science Foundation Network
(NSFNET), we recommended that NSF (a) ensure that an audit is
conducted of the company that manages NSFNET is audited to verify
that certain funds have been distributed appropriately, (b) take
appropriate action to implement the Acceptable Use Policy (AUP),
and (c) disseminate the Acceptable Use Policy so that all end-users
are aware of its prohibitions.  NSF plans to arrange for the audit
and address the Acceptable Use Policy recommendations after the
implementation of the new NSFNET highspeed network, which is
scheduled for April 1995.  We consider management's action to be

5.  In Semiannual Report Number 8 (page 33), we recommended that
NSF issue ethics regulations that address concerns specific to NSF
employees.  The Office of General Counsel drafted these
regulations, and they have been cleared by the Office of Government
Ethics.  The Office of General Counsel expects to issue these
regulations by May 1995.  We consider management's action to be

6.  In Report Number OIG 93-2101, "Review of National Science Board
Members' Bank Account," March 31, 1993, we recommended that NSF's
Director seek approval from the Comptroller General to fund the
awards dinner from NSF's appropriations accounts.  NSF requested an
opinion from the Comptroller General.  A response is expected soon.
We consider NSF management's response to be reasonable.

Prepared by:

Office of Inspector General
National Science Foundation

For additional copies, write:

Office of Inspector General
4201 Wilson Boulevard
Arlington, VA  22230

For additional information, call:

Audit                    (703) 306-2001

Investigations           (703) 306-2004

Oversight (including misconduct in science
and inspections)         (703) 306-2006

Legal                    (703) 306-2100

Electronic Mail Hotline: