Semiannual Report - September 1995

Published by the National Science Foundation, Office of Inspector General on 1995-09-01.

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

Title  : Number 13--NSF OIG Semiannual Report to the Congress
Type   : Report
Date   : January 23, 1996
File   : oig13

National Science Foundation

Semiannual Report to the Congress

Number 13

April 1, 1995 - September 30, 1995

Office of Inspector General

Letter to the National Science Board
and the Congress

This report describes our activities and accomplishments for the
second 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 implemented a strategic plan for audits that employs risk
assessment principles to maximize the effectiveness of existing
audit resources.  We recommended several actions that, if
implemented, could save the government more than $7 million.  We
also began reviewing key operational areas that will be used in
auditing agency-wide financial statements for FY 1996, when the
Chief Financial Officer and Government Management Reform Acts
require that we begin auditing financial statements that encompass
all of NSF's operations.

In this report, as well as in presentations before members of the
research community, we continue outreach activities to explain
policy and procedures regarding misconduct in science and assist
the community in resolving allegation as they arise.  We referred
six cases involving allegations of misconduct in science to the
Deputy Director for adjudication.

Linda G. Sundro
Inspector General
October 31, 1995

Executive Summary

Financial Audits

Our strategic plan for audits will help conserve audit funds.  By
using risk assessments principles, we focus on financial
irregularities that involve large dollar recovery.

The government could save $4.5 million by not paying fees to a
nonprofit organization to cover costs that are unallowable under
federal cost principles.

In our evaluation of the operations of a research vessel in
Antarctica, we found three areas where the program could save
between $1.2 and $2.6 million.

NSF could save over $500,000 by changing the methods it uses to
provide administrative services for peer reviewers and other

Fifty organizations used $600,000 in funds designated for
participants at NSF-sponsored meetings for other purposes.  We are
conducting additional audits.

We are reviewing key operational areas that will be used in
developing agency-wide financial statements for FY 1996.

Inspections and Program Oversight

We conducted inspections at a state university and a liberal arts
college.  We also found that an IPA serving as a program officer
violated agency regulations by handling a proposal from his home


A senior official at an educational association pled guilty to
embezzling $19,598 in grant funds.

A U.S. District Court sentenced one small business to 5 years'
probation.  The Department of Justice is reviewing the actions of
other business that received awards under the Small Business
Innovation Research program.

Misconduct in Science

Successful adjudication of misconduct in science cases involves
both the determination that deviation from accepted practices is
serious and the determination of the degree of serious deviation
from accepted practices that has taken place.

The concept of serious deviation from accepted practices, as
defined by the relevant scientific community's standard of
professional conduct, is no less definite than standards of conduct
upheld by the Supreme Court for other professions.

We recommended that the Deputy Director finds misconduct in six new
cases.  These cases involve plagiarism, breach of the
confidentiality of peer review, failure to follow regulations on
the use of human subjects, and misrepresentation of credentials.

Table of Contents














ASA       Antarctic Support Associates

ASC       Division of Advanced Scientific Computing

CAS       Cost Accounting Standards

CFO       Chief Financial Officer

DAEO      Designated Agency Ethics Official

DoJ       Department of Justice

EHR       Directorate for Education and Human Resources

GMRA      Government Management Reform Act

IPA       Scientist Employed Under
          the Intergovernmental Personnel Act

IRB       Institutional Review Board for
          the Protection of Human Subjects

NASA      National Aeronautics and Space Administration

NSB       National Science Board

OGC       Office of General Counsel

OGE       Office of Government Ethics

OMB       Office of Management and Budget

OPP       Office of Polar Programs

PI        Principal Investigator

RUI       Research in Undergraduate Institutions

SBIR      Small Business Innovation Research Program

SSI       Statewide Systemic Initiative

Reporting Requirements

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 Deficiencies

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

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

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

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

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

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

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

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 or 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.  It also
reviews agency operations and ensures that financial,
administrative, and program aspects of agency operations 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.


We continue to devote most of our audit resources to reviewing
grants, contracts, or cooperative agreements. This approach focuses
our audit resources on external organizations that receive most NSF

NSF has overall responsibility for ensuring that certain
organizations that receive NSF funds have financial systems that
are adequate to properly administer federal awards. NSF is
designated as the "cognizant" federal audit agency for these
organizations based on Office of Management and Budget (OMB)
Circulars A-88 and A-133.  We are expected to audit these
organizations on a regular, cyclical basis.  NSF is the cognizant
federal agency for approximately 650 institutions, including
not-for-profit organizations (such as education associations and
museums) businesses that receive NSF awards, independent centers
and facilities, and contractors who perform work for NSF.  NSF is
not the cognizant federal audit agency for most of the colleges and
universities it funds.

When the OIG was created in 1989, its predecessor office audited
each organization for which it was cognizant about once every 12
years. That audit cycle was far too long because it permitted
irregularities to exist for years before they were identified.
Under the guidance of the National Science Board's (NSB) Committee
on Audit and Oversight, we gradually reduced the audit cycle.  We
now audit organizations for which we are the cognizant federal
audit agency about once every 6 years. The General Accounting
Office has indicated that an audit cycle of 3 years is usually
optimum, but we believe an audit cycle of 6 years is acceptable in
the current budget environment.

In addition to auditing financial systems maintained by
organizations for which NSF is cognizant, we are required to audit
some expenditures under NSF awards at organizations for which we
are not cognizant.  At these organizations (primarily colleges and
universities), we do not review financial system issues applicable
to the university as a whole, but we do review particular issues
involving individual NSF awards.  In 1991, the Senate Committee on
Governmental Affairs reviewed our audit coverage of NSF grants at
organizations where NSF is not cognizant. Both the Senate Committee
and the General Accounting Office recommended that we increase our
oversight of NSF grants at these institutions.

Despite this direction, our resources are becoming more limited.
Reasonable financial projections indicate that, at minimum, we
will have to absorb future cost-of-living increases.  Some OIG
auditors who are now reviewing external awards will have to be
reassigned to new internal audits required by the Government
Performance and Results Act and the Chief Financial Officer (CFO)
Act. In addition, we will have to reduce the amount we spend on
external contractor auditors so we can expand contract audit work
on NSF's financial statements.  In FY 1997, we expect to use
approximately $350,000 (about 15 percent) of our audit resources to
support the cost of auditing NSF's financial statements.  By way of
comparison, in FY 1994, we spent $174,000 to comply with our audit
obligations under the CFO Act.

As audit resources become more limited, we are concerned about our
ability to adequately review NSF awards.  We are not able to
effectively audit all awards that might benefit from a financial
review.  Accordingly, we modified our audit plan to focus on those
awards that are at the greatest risk of misusing funds.

To avoid an extension in the audit cycle for cognizant
organizations beyond 6 years, we also revised the methods we had
been using to decide which cognizant organizations to audit. We
believe this will help us keep increases in the audit cycle as
small as possible.

Our strategic plan for audits explains how we intend to use our
audit resources. The plan is to select organizations and awards for
review based on a preliminary assessment of whether these
organizations would have difficulty complying with regulations that
govern the use of federal funds. By using risk assessment
principles, we try to identify those organizations and awards that
have the greatest risk for financial irregularities and provide
for the greatest dollar recoveries.  To obtain the maximum benefits
from our limited resources, we will continue developing methods of
identifying "high-risk" awards for audit.

We are using this approach to identify potential auditees out of
all organizations that receive NSF funding, including those
organizations for which NSF is cognizant. At institutions for which
we are cognizant, we will continue to conduct limited reviews of
financial and accounting systems on a regular cycle, but we will
decide whether full audits are appropriate and determine the scope
of the audit based on our assessment of risk.  At all other
organizations, we will conduct audits only when we identify a
specific issue involving a particular NSF award.

When we develop audit plans, we first conduct a risk assessment
using information that NSF already has available to determine which
organizations and awards are at the greatest risk of misusing
federal funds.  We then conduct in-house surveys by reviewing
information obtained directly from potentially high-risk
organizations. Information we use to make audit decisions includes
findings from prior reviews, patterns of expenditures under awards
by cost category, and the organization's internal control
procedures.  If, after we review this information, we believe the
organization is at risk of misusing funds, we conduct either an
on-site review or a complete audit. We conduct an on-site review
when we believe only a site visit will provide us with the
information we need.

On-site reviews involve a more in-depth review of the
organization's operation than an in-house survey provides. We
conduct a complete audit if the information gathered during the
risk assessment leads us to believe that funds are at substantial
risk.  Limited, on-site reviews may also lead to complete audits.
We are more likely to conduct an on-site review or a complete audit
at organizations for which we have a comprehensive audit
responsibility as the cognizant audit agency.

The strategic plan will help us conserve audit funds; however,
heavy reliance on surveys involves significant risk to NSF. Because
surveys provide only a limited understanding of an organization's
fiscal situation, it is likely that some organizations and some
awards that would benefit from an audit or on-site review will not
be identified.  However, in the current budgetary environment, we
believe the use of risk assessments and surveys to identify
organizations and awards for audit will provide NSF with the
greatest possible benefits.

In this reporting period, we developed a questionnaire to help us
identify and evaluate risks associated with NSF awards at grantee
organizations.  We used information gathered by this questionnaire
to rate NSF awards at 450 grantee organizations according to 4 risk

     our level of audit responsibility (whether we are

     the grantees' familiarity with managing federal funds,
     (the program's complexity, and

     the type of program and institution that received NSF

We completed risk assessments for large-scale centers and
facilities located at universities and other nonprofit
institutions, large awards supported by NSF's Directorate for
Education and Human Resources (EHR), and grants provided for
modernizing academic facilities. Our risk assessments and in-house
surveys indicated that it was not necessary for us to conduct
audits of NSF awards at 336 of the 450 grantee organizations we
reviewed. Based on the results of our risk assessments and surveys,
we are reasonably confident that NSF awards at these organizations
are expended in a manner that will adequately safeguard federal

Of the 450 organizations rated, we identified high-risk awards at
114 organizations. At these organizations, we conducted in-house
surveys to determine whether an audit or on-site review was
necessary.  These in-house surveys provided information on
internal controls and costs incurred under the NSF awards.  Of
these 114 surveys, 94 are in-process and may result in on-site
reviews or audits.  The remaining 20 in-house surveys resulted in
either short, focused, on-site reviews or full audits.

At the end of this reporting period, we had completed 8 on-site
reviews and initiated 12 audits--5 of which are complete. By using
information developed during our  risk assessments and in-house
surveys, we shortened the time we spent reviewing financial records
and questioned over $300,000 of costs in the eight on-site reviews.
The five audits identified over $7.2 million in savings for the
government. The results of these reviews are discussed below.


Questioned Cost

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.


Review of a Major NSF Facility
Identifies Substantial Cost Savings

During this reporting period, we reviewed several activities at a
major NSF-funded facility that is operated by a nonprofit
organization comprising institutional members throughout the United
States and Canada.  In FY 1994, the organization received $122
million in revenue, which included $102 million from federal
agencies.  Of that $102 million, NSF contributed $66 million
through a cooperative agreement.

We identified the following three areas of concern:  the amount
of, and justification for, management fees the nonprofit
organization received from federal sources; the FY 1994
allocation of costs among the various projects at the organization;
and the organization's implementation of the Cost Accounting
Standards (CAS).


The government generally pays fees to for-profit entities because
those entities must make a profit on their transactions to remain
in business.  However, the government sometimes pays fees to
nonprofit organizations even though fees cover costs the government
usually considers unallowable. The government cannot dictate how
organizations spend federal money they receive as fees.

In 1960, when NSF first began funding the facility, the nonprofit
organization requested that NSF pay it a fee to cover both indirect
and unallowable costs.  At that time, the nonprofit organization
had not yet established an indirect cost pool, and it had no other
source of income to cover costs that were unallowable federal

By 1982, the nonprofit organization had steadily increased the
revenue it was receiving from NSF and other federal agencies. At
that time, the organization established an indirect cost pool
because it was receiving funds from entities other than NSF and it
wanted to equitably allocate its indirect costs.

In 1982, the nonprofit organization also requested that NSF pay it
$75,000 per year to cover its unallowable costs.  NSF agreed, and
it still pays the organization a flat $75,000-per year fee.
Because the organization also receives fees from other federal
agencies, it has accumulated a large amount of federal fees. In FY
1994, the nonprofit organization received almost $450,000 in fees
from NSF and other federal agencies.

In January 1995, the nonprofit organization notified NSF that it
wanted to charge a 3-percent fee on all non-NSF funds that pass
through NSF as interagency fund transfers. If the current level of
interagency fund transfers continues and agencies agree to pay the
3-percent fee, we estimate the nonprofit organization will receive
over $500,000 in additional fees from federal agencies each year,
giving it a total of $950,000 in fees per year from federal

NSF, as the nonprofit organization's cognizant agency, is in the
best position to assess whether fees in this amount should be paid.
We reviewed the total amount the nonprofit organization received as
fees from federal and nonfederal sources and asked the nonprofit
organization for its justification for assessing the fees.  We were
told the organization was using fees to maintain a reserve to pay
for three major classes of expenditure: maturing liabilities,
equipment expenditures, and scientific research.

     Maturing Liabilities  In FY 1994, the nonprofit organization
maintained a $3 million cash reserve.  We were told this cash
reserve was used to pay bills and other maturing liabilities on
time.  This reserve fund relieves the financial pressure that can
occur if the organization incurs a cost before it receives payment
from the government for that expenditure and the organization is
not reimbursed before the bill comes due.

In fact, the organization typically received most of its federal
funds either before it incurred the costs or within 5 days of its
request for reimbursement.  Even if the organization received no
funds in advance of incurring liabilities, we believe a
$3-million reserve is approximately double the amount of working
capital necessary to cover any temporary delay in the receipt of
federal funds.

     Equipment Expenditures  The nonprofit organization claimed it
needed to use funds from the cash reserve to purchase equipment.
We were also told the organization expected to assess its indirect
cost pools for this equipment's depreciation.  We question the
appropriateness of using federal funds to purchase equipment and
later charging a portion of the purchase cost against the indirect
cost pool as depreciation. Maintaining a cash balance to purchase
equipment and later charging the depreciation of the equipment
against the indirect cost pool would, in effect, require that the
government pay significantly more than the actual cost of the

     Scientific Research and Educational Activities  The nonprofit
organization told us it uses a portion of its fees to support
scientific research and educational activities.  We are concerned
about this use of fees because it appears to fund research by
circumventing NSF's peer review system.  We believe the
organization's requests to fund scientific and educational
activities should be evaluated under NSF's peer review system.
NSF's peer reviewers and program staff would then be in a position
to assess whether the research this organization proposes to fund
is more important to achieving NSF's research goals than proposals
awarded directly from NSF program funds using widely respected peer
review methods.  We question whether this use of fees for
non-peer-reviewed research is the most effective use of program

This nonprofit organization employs approximately the same number
of people as NSF. In FY 1995, Congress appropriated $9,000 for
NSF's "unvouchered expenditures" (for example, entertainment
expenditures) fund. We believe the non-profit organization should
be able to establish a discretionary fund that would operate like
NSF's unvouchered expenditures fund. The organization could
establish this discretionary fund from nonfederal sources by using
some of the $1.8 million in unrestricted contributions it receives
from nonfederal entities.

We recommended that NSF, as the nonprofit organization's cognizant
agency, stop paying any fees to the nonprofit organization and
notify other federal agencies of its action.  If NSF adopts this
recommendation, and other federal agencies follow suit, the
government would save over $4.5 million over the 5-year term of
the cooperative agreement (about $900,000 annually).  If NSF
decides not to adopt this recommendation, we recommend that it
notify Congress of all fees the government intends to pay the
nonprofit organization and receive congressional approval for these

Cost Allocation

All programs at the nonprofit organization benefit from services
provided by the facility's budget office and two libraries.  The
nonprofit organization charges the NSF-funded facility $1.5 million
per year for these services.  We recommended that the nonprofit
organization distribute the $1.5 million among all programs that
benefit from the services.  By adopting our recommendations, NSF
would have saved about $1 million over the life of the 5-year
cooperative agreement (about $200,000 annually).  NSF agreed to
require that the organization distribute the library charges among
all programs, but it did not accept our recommendation to
distribute costs for the budget office.  In this way, NSF will save
only $750,000.

Cost Accounting Standards

CAS identifies 19 areas that should be addressed in a cost
accounting system. CAS requires the submission of an annual
disclosure statement that describes an organization's cost
accounting practices. This description should include a definition
of the methods used to distinguish direct from indirect costs and
allocate indirect costs.  The use of a disclosure statement is
intended to reduce the potential for disagreements about an
institution's cost accounting practices.

If this organization had submitted a disclosure statement, NSF
would have known that costs for the libraries and budget office
(discussed above) were allocated solely to the major facility
rather than distributed among all of the organization's activities.

The organization did not want to comply with CAS because it felt
the costs outweighed the benefits.  In particular, it felt that
developing a disclosure statement would be too costly and time
consuming.  The Cost Accounting Standards Board has analyzed these
kinds of concerns and concluded that the initial costs associated
with complying with CAS will be offset by reductions in
administrative costs associated with preparing cost accounting data
to be presented to cognizant federal agencies.

NSF management is evaluating our recommendations to eliminate the
payment of fees to the nonprofit organization and require that the
organization comply with CAS.  We will discuss NSF's response in
our next semiannual report.

Cost Savings Associated
With Antarctic Research Vessel

In our continuing review of the United States Antarctic Program, we
evaluated the management of a subcontract to operate a research
vessel (the Vessel).  NSF has a contract with a for-profit company
(the Company) to administer logistical support functions, such as
the operation and maintenance of U.S. facilities in Antarctica and
the management of research vessels.  The Company has a subcontract
with the Vessel's owner to operate the Vessel.  The Vessel is an
ice-breaking ship that was designed to operate year-round in
Antarctic waters and provide a multidisciplinary research platform
to researchers in the Antarctic.

The Company has a 10-year, $79.4 million subcontract with the
Vessel's builder.  The subcontract went into effect on March 1,
1992.  Under the subcontract's terms, the Company pays the Vessel's
owner a fixed amount for each day the Company charters the Vessel.
On September 29, 1992, the Vessel's owner requested that the
Company increase the subcontract's daily rate because it believed
NSF required that the Vessel conduct ice operations that exceeded
those outlined in the subcontract's representative mission profile.

The Vessel's owner believed the ice operations that exceeded those
outlined in the representative mission profile increased its cost
to maintain the Vessel and the risk of catastrophic ice damage.
Although the subcontract does not refer to the representative
mission profile directly, the Vessel's owner believed that the
company was required to increase the daily rate to compensate for
increased costs as a result of the increased ice-breaking activity.

The subcontract between the Company and the Vessel's owner was
provisionally modified on August 9, 1993, to address these
concerns. NSF has not yet approved the provisional modification. At
the request of NSF's contracts branch, we reviewed the provisional
modification to help NSF determine whether it should be approved.
The results of our review follow.

Future Savings

During our review, we found three areas where the Program could
reduce future costs without affecting the Vessel's operations.
Implementation of all of our recommendations should save NSF
between $1.2 and $2.6 million.

The original subcontract provided the Vessel's owner with 12 paid
maintenance days for Vessel repairs, dry-docking, and inspections.
The Company's proposed modification eliminated the maintenance days
from the subcontract, increased the charter daily rate by $1,500 a
day, and recommended that the Vessel remain on-hire for inspections
required by the U.S. Coast Guard.  We recommended that the Company
keep the 12 maintenance days that were in the original contract,
increase the charter daily rate by $785 (rather than $1,500), and
place the Vessel off-hire during required inspections. If NSF
adopts these recommendations, we expect NSF to save at least
$931,040.  We based this amount on the Vessel owner's estimate of
time the Vessel will spend in dry dock for repairs.

The owner also proposed that the Vessel be kept on-hire in the
event of catastrophic, obviously ice-related damage to any 1 of its
10 ship systems.  We recommended that the Company eliminate the
catastrophic damage clause from the proposed contract modification
because NSF would risk significant liability in the event of
long-term damage to the Vessel--liability that, under the current
contract, is assumed by the Vessel's owner.  Although we made no
specific projections regarding future cost savings, the potential
savings to NSF could be substantial if the Vessel needs extended
repairs for catastrophic damage.

In calculating the modified charter daily rate, the Vessel's owner
assumed a 5-percent inflation rate to calculate future increases;
however, this rate is not in line with current or projected
inflation rates.  We believe the daily rate increase should be
adjusted by current inflation rates (that is, the Consumer Price
Index), which averaged 2.85 percent from 1992 to 1994.  We do not
believe the Vessel's owner should assume an inflation rate for the
modification that is higher than current expectations.  If NSF
adopts our recommendation, it could save $266,278 to use for other
scientific purposes or logistics support.

Unallowable Costs

We questioned $646,266.  We questioned this amount because we found
the following.

     The Vessel spent 24 of the 365 days on charter in the
     second subcontract year in dry-dock for scheduled maintenance.
     We believe the subcontract's terms dictate that the Vessel be
     placed off-hire for maintenance and repair.  As a result, we
     questioned $420,822.

     We questioned $110,509 because the Company paid for the fuel
     that was used to transport the Vessel to the dry dock from
     port.  However, neither the Company nor NSF required that the
     Vessel be placed in dry-dock.   Therefore, the Vessel's owner
     is responsible for the fuel cost.

     During the Vessel's initial testing, the Company deferred
     acceptance tests for  acoustic performance.  Before the Vessel
     was dry-docked in July 1993, the Company subcontracted with
     two firms to conduct the acceptance tests.  The subcontract
     between the Company and the Vessel's owner states that the
     Vessel's owner must pay for all acceptance tests.  The Company
     paid the two firms $114,935 to conduct the acceptance tests
     and argued that the costs were incurred to verify whether the
     Vessel's acoustic condition met the subcontract's technical
     requirements.  We believe it is the Company's role to verify
     the Vessel owner's testing results, not to conduct tests of
     its own. Therefore, we questioned $114,935.

NSF's management is evaluating our recommendations. We will report
on NSF's response in our next semiannual report.

Costs for Travel Services for
Peer Reviewers Can Be Managed
More Efficiently

NSF has a contract with a travel agency to provide travel services
for NSF employees. NSF also contracts for the services of another
travel agency to provide NSF with administrative services for peer
reviewers. The services for peer reviewers include arranging travel
plans, processing reimbursement vouchers, and preparing for
educational and scientific meetings. The contract for travel
services for peer reviewers was the subject of our review.

The travel agency receives work orders from NSF divisions that
detail how travel funds for peer reviewers are to be spent. In 1985
and 1991, NSF awarded the travel agency travel service contracts
totaling over $27 million. The travel agency claimed $19.6 million
on these contracts.  Claimed costs included charges for
transportation, per diem for meals and lodging, rental expenses for
meeting rooms and equipment, and contractor fees.

We identified four changes in operations that, over 5 years, could
save NSF over $500,000.  We recommended that the travel agency use
NSF meeting rooms and facilities rather than renting meeting rooms
at hotels ($221,210),  no longer provide for on-site meeting
services rather than using the contractor's staff ($141,365),
provide funds for lodging and meals to local participants
($124,950); and allow participants to obtain their own meals rather
than providing for expensive group meals ($24,415).

We questioned over $33,000 that was charged to the two contracts.
Specifically, we questioned:

     $16,356 for transportation compensation, equipment rental, and
     contractor fees that were overcharged as a result of duplicate
     payments, billing errors, inaccurate calculations, and
     excessive per diem costs;

     $15,231 for meal costs, car rental charges, lodging
     payments to local participants, and claimed costs that
     exceeded budgeted amounts; and

     $1,819 for unallowable travel costs.

We also recommended, and the contractor agreed, to remit $113,550
of interest earned on federal funds to the U.S. Department of

In addition, we found that the contractor did not require that
travelers submit travel vouchers after trips and did not complete
time and attendance sheets for panel meetings.  We recommended that
NSF require that the contractor correct these practices.

NSF agreed with most of our recommendations for future savings.
NSF also began evaluating whether it should continue to provide
lodging and meals to local participants.  NSF will address that
issue and the questioned costs during the audit resolution process.

Our risk assessments identified repeated problems associated with
accounting for participant support costs.  We have developed an
audit program that focuses on this type of expenditure.

NSF's Grant Proposal Guide defines participant support costs as
"costs of transportation, per diem, stipends and other related
costs for participants or trainees (but not employees) in
connection with NSF-sponsored conferences, meetings, symposia,
training activities and work-shops." OMB guidance requires that
award recipients obtain prior approval from federal awarding
agencies to transfer funds allotted for training allowances (direct
payments to trainees) to other expense categories.  NSF has
implemented this OMB requirement through its Grant General
Conditions, which requires that award recipients obtain prior
written approval from the cognizant NSF program official before
they reallocate award funds that are budgeted for participant or
trainee support costs.  This rule ensures that funds designated for
participants at NSF-sponsored meetings are not used for other
purposes without NSF's explicit approval.

We are conducting our review of participant support costs in two
phases. During this reporting period, we completed Phase I, which
involved an evaluation of the extent to which awardees followed


NSF's prior approval policies and obtained the program office's
prior written approval before they used participant support funds
for other expense categories.

Phase I identified 18 institutions from prior audits with
participant support cost problems as well as 81 academic and 100
nonacademic institutions for additional reviews.  We questioned
about $600,000 in participant support costs because 50 awardees
spent participant support funds for other expense categories
without obtaining NSF's prior written approval.  Many of these
awardees indicated that they were not aware of the requirement to
obtain NSF's prior approval to move participant support funds to
other cost categories.

We also identified problems with NSF's enforcement of the prior
approval requirement.  Some awardees either received or believed
they received verbal approval from cognizant NSF program officials
to transfer participant support funds to other cost categories.
Also, some prior approval letters from NSF did not specify the
amount of funds approved for transfer. This approach allows
awardees to transfer all funds initially designated for participant
support to other cost categories.

We also identified instances where NSF's program officials approved
the transfer of funds after the fact. In some cases, the awardee
sought the officials' approval after all of the funds had been
spent.  In several instances, awardees requested after-the-fact
approval when they learned of our review.

We recommended that NSF management remind all NSF grantees and
program officers about the requirement regarding the transfer of
participant support funds and reiterate that after-the-fact
approvals will not be routinely approved.  We also recommended that
management ensure that there is an adequate written record to
indicate whether the request was approved. And, if the transfer is
approved, how much money may be transferred.  NSF is reviewing our

During Phase II of our review, we intend to:

     determine the extent to which awardees adhere to the federal
     cost principles and NSF guidelines by charging only allowable
     and supportable participant support costs to NSF awards, and

     consider whether awardees have implemented adequate internal
     controls to avoid fraud or abuse involving payments to

We have identified 18 candidates for on-site audits in Phase II. We
expect to complete these audits during the next reporting period.


NSF provides Statewide Systemic Initiative (SSI) awards to 20
states to improve science education in those states. The SSI
program was designed to increase students' knowledge of science and
mathematics and give students an opportunity to acquire critical
thinking skills.  The program is expected to account for
approximately $250 million of NSF's budget over a 10-year period.
NSF expects significant participation by the states, including
management of the awards; cost sharing; and allocation of personnel
with scientific, mathematical, and financial expertise.

Our risk assessment process identified the SSI program as one that
might benefit from further review.  We initiated surveys of SSI
awards in eight states.  Based on the results of the surveys, we
began audits in seven of those states. Preliminary audit findings
indicate that some problems may exist in the program. We believe an
in-depth audit of parts of the SSI program would be helpful to SSI
recipients and NSF management.

The implementation of the program differs in each state, as does
the primary recipient of NSF funding.  Primary recipients include
state agencies, universities, school districts, and nonprofit
professional education organizations.  We found that many primary
recipients issued subgrants to other subsidiary organizations.  It
was common for NSF funds to flow through three or four levels of
organizations. For example, in a state where the primary
grantee was a state agency, the state agency provided a subcontract
to a state university. The state university then subcontracted some
of the funds to a school district that, in turn, provided some
funds to individual schools. In some states, there were as many as
200 implementing institutions.

Our preliminary audit results indicated that some primary award
recipients were not monitoring costs claimed by subsidiary
organizations.  We believe this occurred because there were
multiple levels of administration, and primary award recipients
were confused about their role in the awards' fiscal management. We
are determining whether NSF management needs to take additional
action to ensure the accuracy of costs claimed by subsidiary

Our initial reviews of records maintained by primary award
recipients indicated that support for cost sharing promised by
awardees was not always maintained, claimed participant support
costs were not documented, award recipients' changes in the use of
participant support funds were not approved, and recipients
overcharged and mischarged indirect costs.

We believe these preliminary findings support our decision to
proceed with an in-depth analysis of the SSI program.


In Semiannual Report Number 12 (page 7), we reported on the changes
to the CFO Act of 1990 that were instituted by the Government
Management Reform Act (GMRA) of 1994.  These Acts require that we
increase the scope of our annual audit of NSF's financial

The CFO Act requires that we conduct an annual audit of NSF's
Donations Account financial statements, which represent less than
1.5 percent of NSF's $3 billion budget.  GMRA expands the audit
mandate to require annual audits of all agency funds.   The first
expanded audit, which involves FY 1996 expenditures, must by
completed by March 1997.

We are preparing for the FY 1996 agency-wide audit by conducting
multiphase reviews in key operational areas that gather the data
that will be used in developing agency-wide financial statements.
In this reporting period, we began the following.

     An audit of NSF's 1995 Donations Account financial statements.

     The second phase of our audit of NSF's general ledger, which
     includes a review of the daily maintenance of the general
     ledger structure and account balances.

     The second phase of our review of electronic data processing
     controls in NSF's financial accounting system.  We are
     identifying the procedures and controls in various subsystems
     (payroll, purchasing, disbursing) that provide information to,
     and receive information from, NSF's financial accounting

     An audit of NSF's budget execution system.  We are examining
     the procedures and internal controls used to execute and
     monitor NSF's budget.

We also contracted with an independent public accounting firm to
review NSF's Federal Cash Transactions Report system, including the
procedures NSF uses to issue grant funds, record grant expenses in
the financial accounting system, and reconcile NSF and grantee cash

We are continuing to participate in discussions with OMB, NSF
management, and the NSB to resolve financing issues related to
these agency-wide audits.  The NSB has approved a $500,000 funding
level for the 1996 audit.  For the FY 1997 audit, the NSB accepted
the Deputy Director's recommendation that the cost for contract
services for the financial statement audit be charged to the
accounts audited. However, the NSB specified that the amount
charged to program and other agency accounts will not exceed

NSF's CFO awarded a multi-year contract to a public accounting firm
for approximately $600,000 to provide a review of the financial
management system's auditability and internal controls, as well as
recommendations for streamlining and improving the system, formats
for financial statements, and the CFO's Annual Report.  Once the
CFO determines the basic format and content for the agency-wide
statements, we will be able to make more detailed plans about our
audit approach.


Although the awards we audit involve different projects, our
findings often involve similar issues.  For example, we often find
that grantees cannot obtain and/or account for promised cost
sharing.  We also find that consultants' and grantees' payments are
often excessive or unsupported.  Examples of these reviews follow.

Audit of a Learning Laboratory for
Children Raises Significant Concerns

We reviewed two grants totaling over $500,000 awarded to a
nonprofit organization to develop, produce, and field test four
"learning lab units," and to support a conference on learning in
children's museums.  The proposed learning lab units consisted of
teachers' guides, student workbooks, hands-on exhibits, and
software that assist fourth through sixth grade students in
informal learning with self-directed, interesting materials.  We
were concerned because the awardee could not give us schedules of
claimed costs, the quarterly expenditures the grantee reported to
NSF did not agree with expenditure reports the organization's
financial managers provided, and the organization maintained cash
balances that were substantially greater than its cash needs under
the award.

The organization could not provide any documentation to
substantiate over $200,000 in costs it claimed had been incurred
under the award.  In addition, at the time of our site visit, the
organization could not provide evidence that it accomplished
essential award objectives.  As a result, we concluded that claimed
costs exceeded the costs actually expended on the NSF award.  Based
on our preliminary results, we referred the audit to our
investigations section for further analysis.

School District Charges
Incorrect Labor Costs to Award

We reviewed two grants totaling $1,087,006 awarded to an urban
school district in the northeast. The school district claimed
$1,069,504, and we questioned $161,002.  We questioned $119,783 in
salaries charged to the award because two employees were paid for
more hours than they actually worked on the award. We also
questioned $14,938 in unallowable costs because the school district
incorrectly charged indirect costs to teacher stipends, and charged
personal items to the award.

The school district's accounting office did not monitor or maintain
records of project cost sharing.  The school district proposed over
$2.1 million in cost sharing under the two awards but could not
support $1.5 million of that amount.  In addition, the school
district neither submitted a final project report nor notified NSF
that a principal investigator (PI) who was considered integral to
the award left the school district even though the grant's
conditions required that NSF be notified. The school district
generally agreed with our findings and recommendations.

Computer Services Contractor
Claims Unallowable and Unsupported Costs

NSF awarded a 4-year, $3 million contract to a computer services
contractor to develop and maintain software used by NSF's mainframe
computer.  The contractor claimed $2,994,659, and we questioned
$122,295.  We questioned $101,311 because the contractor billed NSF
twice for the use of the contractor's computer center and computer
terminals and did not record all of the claimed direct costs in its
financial records.  We questioned an additional $20,955 because the
contractor charged labor rates that exceeded the negotiated rates.
The contractor did not accept our findings and recommendations.
The agency will resolve the findings during the next reporting

Renting Equipment From a Principal
Investigator Results In Questioned Costs

NSF granted a nonprofit corporation a 3-year award totaling
$641,988 to provide training and research experience in aquatic
ecology to 30 teachers each year.  The corporation claimed
$596,208, and we questioned $58,689. We questioned $35,351 because
the corporation claimed costs for renting equipment from the PI on
the award. When a less than arms-length relationship exists between
the lessor and lessee, grantees can claim only the actual cost of
the rented equipment, in this case depreciation. We recommended
that the corporation credit the award $11,979 because the
corporation billed the award directly for items that should have
been included in the indirect cost pool and equitably distributed
among all of the corporation's activities.  The agency will resolve
the findings during the next reporting period.

School District Needs to Identify
Additional Cost Sharing

We conducted a survey of a public school district in the northeast
that received $3,538,875 under four grants.  NSF granted the public
school district the awards to further its efforts in curriculum
development and teacher enhancement.  The school district claimed
$1,760,445, and we questioned $3,055 because the school district
paid consultants more than the allowable rate.

The school district had promised to share the project costs, but it
contributed $254,164 less than promised during the first 2 years of
the award.  In addition, it did not adequately document its cost
sharing efforts. The school district accounted for participant
support costs as salaries and wages. The district agreed with our

Zoological Society
Needs to Identify Cost Sharing

We conducted a survey of a northeastern zoological society that
received a $410,481 grant from NSF.  The grant provided the society
funds to develop carry-along Zoo-Kits for families to use during
zoo visits. The zoo had contributed only 10 percent of $131,089 in
promised cost sharing but had expended approximately 50 percent of
the grant's funds.  The zoological society did not periodically
review and update its fringe-benefit rate to reflect its fiscal
condition. In addition, we could not determine whether the
zoological society complied with NSF's statutory salary limitation
and the work performed supported the grant's objectives because the
zoological society did not have formal consulting agreements.  The
society's management was receptive to our recommendations.


Management's Response Concerning
the United States Antarctic
Program's Continental Operations

In Semiannual Report Number 12 (page 2), we discussed a review of
the operations of the United States Antarctic Program in New
Zealand and at McMurdo and South Pole Stations in Antarctica.  As
a result of our recommendations, the Office of Polar Programs (OPP)

     recouping associated fuel costs (transportation, fuel,
     estimated labor, and direct material) when it sells fuel to
     other nations' Antarctic programs;

     studying the feasibility of using gray-water at the South Pole
     and McMurdo stations.  Antarctic Support Associates (ASA), the
     Antarctic contractor, agreed to document its consideration of
     graywater use when constructing new buildings in the

     planning a complete review of the United States Antarctic
     Program medical care (until the completion of the review, OPP
     instructed ASA to ensure that an employee with appropriate
     medical training is available during the winter at South Pole
     and Palmer stations in case the station doctor becomes
     incapacitated); and

     ensuring that the toilet facilities on the Antarctic aircraft
     are private.

In addition, ASA agreed to:

     expand its spill response procedures to include training
     scientific personnel  (OPP instructed NSF and ASA personnel to
     report deficiencies in spill reporting at field camps when
     noted and requested that ASA retain files with the names of
     people involved in non-permitted releases of chemicals), and

     modify its procurement software in Christchurch to reduce
     duplication of effort.

OPP is also conducting a cost-benefit study to determine the most
cost-effective way of using the barracks in Christchurch.  We
expect to describe the results of this study in our next semiannual


Management's Response to
Recommendations Concerning A
Supercomputing Center

In Semiannual Report Number 12 (page 10), we discussed a report
that detailed at least $5.5 million in savings if the Division of
Advanced Scientific Computing (ASC) adopted our recommendations
regarding NSF's cooperative agreement with a large commercial
company to operate one of NSF's four supercomputer centers.  As a
result of our recommendations, ASC:

     requested that the company submit an additional proposal that
     describes alternate uses for the funds made available as a
     result of the termination of the supercomputer center's lease
     obligations (ASC will then consider whether to provide these
     funds to the company for these new purposes or to fund other

     took steps to deobligate funds that the company had requested
     for independent research and development, which NSF does not
     ordinarily fund; and

     is negotiating with the company to ensure that NSF does not
     pay the operating costs of activities that are not funded by

In Semiannual Report Number 12, we also discussed the fact that the
company billed NSF about $25,000 for consultant fees at rates of
pay that exceeded the maximum rates allowed.  In a subsequent
review of all consultant fees billed to the NSF cooperative
agreement, we questioned $57,595 in excessive consulting fees.

ASC is consulting with the Division of Grants and Agreements and
the Office of General Counsel (OGC) to decide what action to take
regarding a potential exemption from state sales tax on the
purchase of equipment by the supercomputer center.  We will discuss
the results of this consultation in our next semiannual report.


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


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       28

New Allegations               24

     Total Cases              52

Cases Closed After
Preliminary Assessment         6

Cases Closed After
Inquiry/Investigation         18

Total Cases Closed            24

     Active Cases             28


The following section describes cases involving the diversion of

Former NSF Division Director
Pleads Guilty to Embezzling Grant Funds

In Semiannual Report Number 11 (page 22), we discussed a case we
referred to the U.S. Attorney detailing abuses by an education
association's senior official on NSF and Department of Education
awards for a national science education reform program for
secondary schools.  The senior official was a former NSF Division
Director who approved the original grants to the education
association for the reform project.  Shortly after the official
approved the awards, he accepted a position with the education
association as the Director of Research and Development.

We conducted an investigation and audit of the education
association.  We determined that the former NSF Division Director
knowingly and intentionally embezzled travel funds from the
education association, and we questioned $173,408 related to the
science education reform project.  The education association
reviewed our findings and agreed to refund all of the questioned

While the senior official worked at the education association, he
was responsible for public relations and disseminating materials
related to the education reform project.  The individual traveled
throughout the country as a representative of the association
making presentations about science education reform to state and
local school districts and professional educational organizations.
The association paid for the individual's travel with grant funds.
On many occasions, the official also sought reimbursement for
travel expenses directly from the institutions and organizations at
which the individual lectured, despite the fact that the
association had already financed the travel.  When the individual
successfully obtained reimbursements, he deposited the checks into
a personal account without remitting the funds to the association
or notifying the association that a reimbursement had been

During our investigation, the individual resigned from his position
at the education association.  In June 1995, the individual pled
guilty in U.S. District Court to violating 18 U.S.C.  666, Theft
or Bribery Concerning Programs Receiving Federal Funds, and
admitted to embezzling $19,598 in federal funds that were intended
to support official travel expenses related to the grants.
Sentencing in this case is scheduled for November 1995. Based on
the guilty plea, NSF debarred the individual from receiving future
federal funds from any federal agency or participating in federal
grants for a 3-year period.

Principal Investigator
Files False Travel Claims

A PI charged his NSF grant for travel to several meetings.  The PI
obtained duplicate reimbursement for this travel from the
organizations sponsoring these meetings, which he deposited in his
personal bank account. The PI falsely certified to his university
and to several other organizations that no other source was paying
for his travel. Auditors at the PI's university discovered these
false claims.  The PI reimbursed the NSF grant for approximately
$5,000 in false travel claims and resigned from his university

We began an investigation and referred the matter to the Department
of Justice (DoJ).  The PI entered into a settlement agreement with
DoJ in which he agreed not to challenge DoJ's conclusion that he
submitted four fraudulent travel claims. He agreed to pay a $20,000
penalty under the civil False Claims Act ($5,000 for each of the
four fraudulent claims).

Under the settlement's terms, the PI may serve as a senior
scientist on federal awards under certain conditions. The PI's
financial expenditures must be closely monitored by a third party.
Travel paid under federal awards must be exclusively for scientific
purposes and cannot involve any personal matter. Whenever the PI
uses federal funds to pay for travel, any compensation the
PI receives must be used for the grant's purposes and may not be
retained by the PI.


DoJ is working on several cases involving the Small Business
Innovation Research (SBIR) program.  Two cases are described below.

Small Business Sentenced
to 5 Years' Probation

In Semiannual Report Number 12 (page 21), we reported that an SBIR
company agreed to plead guilty to one felony count and pay a civil
settlement of $115,000 for submitting false statements that
concealed the submission of identical Phase I SBIR proposals to NSF
and the National Aeronautics and Space Administration (NASA). On
September 11, 1995, the company was sentenced in U.S. District
Court to 5 years' probation and 100 hours of community service for
making false statements to NSF.  Because the false statements
concealed the fact that the company had submitted duplicate
proposals and received awards from NSF and NASA for the same
research, the company was ordered to develop a plan to ensure that
it notifies the government of future duplicate proposals.  As part
of this plan, the company must submit copies of all proposals and
bids for contracts to the U.S. probation office for review during
its 5-year probation period.  The company was also ordered to pay
a special assessment fee.

Small Business Obtained Over
$200,000 By Filing False Claims

In March 1995, NSF auditors were not able to conduct an audit of a
west coast company's SBIR Phase II grant because the PI, who was
the company's president and sole employee, would not respond to
their request to initiate the audit.  In addition, the PI had not
submitted the required final report on his research activities.

We conducted an investigation and found that the PI had conducted
research only during the first 3 months of the award, even though
the award stipulated that he would work on the project for 24
months.  After the first 3 months of research, the PI stopped
conducting the research and did not notify NSF of this dramatic
change in his level of effort.  Nonetheless, the PI obtained the
remaining $210,000 in grant funds awarded for the research by
completing and submitting invoices and Federal Cash Transaction
Reports to NSF that falsely certified that he was expending all
funds for scientific research under the grant.  The PI did not use
these funds to support research under the grant.  Instead, the PI
used at least $53,900 in NSF funds to finance personal investments
and repay personal debts.  The PI used other funds for travel and
equipment not related to the grant's purpose.

We referred our findings to the U.S. Attorney to determine whether
the PI violated 18 U.S.C. Sec. 287,  False Claims; Sec. 1001, False
Statements; and Sec. 1343, Wire Fraud. In addition, if the PI is
found liable under the civil False Claims Act, the government may
recover triple damages, as well as impose penalties of $10,000 for
each false claim.

We resolved two allegations where we identified improper
expenditures but did not find criminal wrongdoing.

Principal Investigator Spent Funds
Improperly But Did Not Act Fraudulently

We investigated an allegation of misappropriation of NSF funds at
a small university in the south.  According to the complaint, a
professor at the university forged certain documents to use grant
funds for purposes that were not authorized by the grant.

We concluded that the allegation of forgery lacked substance.  The
professor had obtained written authorization to act for a
colleague. In addition, when the professor signed on behalf of the
colleague, the professor signed his name as well, acknowledging
that he was signing for the colleague.

We did conclude that some grant funds were spent improperly.  Under
NSF's Research in Undergraduate Institutions (RUI) program, the
institution received a $66,000 grant to support undergraduate
students.  We found that the professor improperly charged the RUI
grant over $10,000 for equipment and salary costs that were used
for an unrelated research project conducted by the professor and
graduate-level students.  Of the $10,000 in improper charges,
$7,000 was spent on stipends for graduate-level students instead of
stipends for the undergraduate students who were supposed to
receive support under the RUI program.

We also discovered that the professor submitted misleading progress
reports to NSF.  In these progress reports, the professor was
required to identify which students were conducting research while
he was receiving NSF funds.  In fact, all but one of the students
mentioned in the professor's progress reports were supported with
other funding.

As a result of our recommendations, the university agreed to refund
to NSF $10,129, the amount improperly charged to the RUI grant for
student stipends, supplies, and equipment. The university also
agreed to correct misleading progress reports, implement adequate
controls to supervise the professor, and initiate appropriate
administrative action.

Improper Salary Charged
to NSF Contract

We received an allegation that an NSF contractor charged salary
expenses to an NSF contract for work the contractor performed but
was not related to the NSF contract.  A review of labor charges
found that the contractor had charged the NSF contract for a
technical service manager's salary when the manager performed
duties that were not related to the NSF contract.  After the
review, the contractor credited $11,399 in salary charges back to
the NSF contract.


During this reporting period, we analyzed two cases involving the
embezzlement of funds intended for science.  In both instances, we
determined that neither NSF nor other federal funds were directly
involved.  In these matters, we worked with local law enforcement
authorities, and the results of the investigations were provided to
local prosecutors.  Even though these cases did not directly
involve NSF funds, the thefts involved projects that were partially
supported by NSF awards.  Also, the subjects of the investigations
did administer NSF funds at grantee institutions.

Ex-Museum Official Pleads No
Contest in Theft From Museum

A former deputy director of a west coast museum pleaded no contest
in state court to embezzling more than $2 million from the museum
and its nonprofit foundation.  Under state law, the no contest plea
is equivalent to a guilty plea.  The investigation revealed that
the individual used the money to buy cars, pay off personal loans
and credit card purchases, and pay taxes on a relative's property.
The deputy director embezzled funds received from public entrance
fees to the museum and private donations, funds that he was
responsible for administering.  The deputy director also acted as
the institution's authorized representative on federal grants.
Since 1990, the museum foundation received over $2.2 million in
federal funds, which included 16 NSF grants.  We recommended that
NSF, acting as the lead federal agency, initiate debarment
proceedings to exclude the individual from participating in federal
grants for 3 years based on the state conviction.

Former NSF Principal Investigator
Indicted for Fraud

On July 26, 1995, a PI and the PI's secretary were indicted on
state Felony Theft and Conspiracy to Commit Felony Theft charges.
In February 1995, a state legislative audit of a southern
university found that the PI and the PI's secretary had embezzled
money designated for an engineering summer program at the
university.  In 1988 and 1989, NSF supported the university's
engineering summer program with two science education grants
totaling $100,000 awarded to the PI.  The summer program continued
after the NSF grants expired with support from student fees, the
university, and corporate sponsors.  Between 1990 and 1994, the PI
and his secretary deposited $231,185 in checks from corporate
sponsors and students who attended the university's summer
engineering program into a private bank account.  The PI and his
secretary then wrote and endorsed checks payable to cash, totaling
$186,654, from the embezzled funds.  The results of the
investigation were provided to the local District Attorney who
filed the indictment in state court.




New Referrals                        4

Referrals From Previous
Reporting Period                     3

Prosecutorial Declinations           1

Criminal Convictions/Pleas           1

Civil Actions Initiated              2

Civil Complaints From
Previous Reporting Period            1

Administrative Actions               4

Investigative Recoveries*      $66,257

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



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 is continuing studies on specific
issues related to misconduct in science.



NSF's Definition of Misconduct
In Science and Engineering

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.


Key Consideration in Applying
NSF's Misconduct Regulation

NSF's misconduct regulation contains the phrase "fabrication,
falsification, plagiarism, or other serious deviation from accepted
practices in proposing, carrying out, or reporting results from
activities funded by NSF" (45 C.F.R. Sec. 689.1(a)(1)). We
interpret the regulation as empowering NSF to take action against
serious violations of the "common law" of the scientific community,
that is, the shared standards that enable communities of scientists
to function.  Fabrication, falsification, and plagiarism are
examples of the kinds of acts that are so serious as to ordinarily
constitute misconduct, but comparably serious transgressions of
other kinds are also included.

Policy discussions of misconduct have largely neglected the issue
of seriousness.  Yet, in our view, seriousness is a key
consideration in NSF's definition of misconduct.  We have recently
tried to direct the attention of institutions that perform
investigations to this issue, and we are encouraged that some have
responded by giving careful thought to seriousness in their
investigation reports.

Under NSF's regulation on misconduct in science and engineering,
adjudicators must consider the seriousness of an alleged offense at
two separate points.

     Threshold Judgment.  Adjudicators must first decide whether
the alleged offense was serious as part of determining whether it
was a "serious deviation from accepted practices."  This is a
"threshold judgment" that determines whether an act is misconduct.
The question at this point is whether the act crosses the threshold
dividing "lesser deviations" from "serious deviations."  Violations
of the ethical standards of the scientific community that are
lesser deviations from accepted practices (that is, that fall short
of the threshold of seriousness) are outside the scope of NSF's
misconduct regulation.

The threshold judgment of whether an act was a serious deviation
from accepted practices includes a threshold judgment about intent.
The crux of this judgment is whether the level of intent is
sufficiently blameworthy that the act can qualify as a serious
deviation and hence misconduct.  In Semiannual Report Number 9
(page 36), we discussed how to make this judgment and distinguished
different levels of intent and the kinds of blame that can be
associated with them.

     Degree Judgment.  After the adjudicators conclude that a
scientist has committed misconduct, NSF's regulation directs them
to next "consider how serious the misconduct was."  This is a
"degree of seriousness judgment" of conduct that has passed the
threshold.  It locates that misconduct on a continuum.  On the
basis of this degree judgment, adjudicators decide on the
appropriate action or sanction.  Thoughtful assessments of the
degree of seriousness by investigating officials familiar with the
scientific community can help NSF decide what to do when a
scientist commits misconduct.

If misconduct is found, making the degree judgment about
seriousness may involve a fuller consideration of intent than was
necessary for the threshold judgment.  Our society believes that a
naive, thoughtless, or ignorant wrongdoer should be treated less
severely than an experienced, calculating, and knowledgeable one.
It is appropriate for investigating officials to cite any facts
about a person's intent they deem relevant to their degree
judgments of seriousness.  However, assessing the degree of
seriousness involves more than considering intent.  In plagiarism
cases, for example, we consider the amount of plagiarized material
and the originality of the ideas expressed in the copied passages
to be relevant to the seriousness of the misconduct.

We have noted two recurrent, interrelated problems in how
university investigation reports treat seriousness.  First, they
sometimes confuse threshold judgments of whether conduct seriously
deviates from accepted practices with degree judgments of how far
beyond the threshold the conduct falls.  This leads them to
introduce considerations (for example, regarding the subject's lack
of experience) into the threshold judgment that should
appropriately be reserved for the degree judgment.  Second, when
investigating committees believe that a finding of misconduct is
not warranted, they sometimes explain their conclusion by making
strained arguments about intent instead of forthrightly addressing

Consider two cases we reported in previous semiannual reports.  In
the first, an inexperienced scientist admitted that he had sought
funding from NSF by misrepresenting work he had already completed
as work he had yet to perform.  The university investigating
committee concluded that this was not misconduct because the
scientist's intent had been to use the funds for new work, although
that aim had been "poorly expressed."  However, when we sought
clarification of the university's conclusions, the Provost stated
that the scientist's act seriously deviated from accepted practice
at his university, and the scientist knew that he had already
conducted the research in question.  We concluded, and NSF agreed,
that this case passed the misconduct threshold.

The Provost also made a degree judgment about the case.  He cited
a variety of facts concerning both the act itself and the intent
behind it that mitigated the seriousness of the misconduct.  We
found his degree judgment persuasive, and so did NSF.

We do not believe the investigating committee's factual or ethical
conclusions about that case were fundamentally different from our
own.  We believe the committee's report distorted the factual
record and evaded the threshold conclusion that the facts required
because the committee wanted to avoid unfairly severe actions
against the subject.  The Provost, by directly confronting the two
necessary judgments about seriousness, did more than the committee
to achieve this end as well as uphold and articulate the ethical
standards of the scientific community.

In the second case, a scientist repeatedly used the text of a
methodological description written by two other researchers
without attribution to the source.  There was no evidence that the
omission of a citation or quotation was inadvertent or accidental,
in the sense that a word processing error might be.  To the
contrary, the scientist admitted that she did not wish to rewrite
the description in her own words for fear that, because English was
not her native language, she would unintentionally distort the
method she planned to employ.  Although it was clear that the
scientist intended to deceive her readers into thinking that the
words were her own, an investigating committee at her university
concluded that she had not committed misconduct because she had "no
intent to deceive."

In our view, the core issue in this case was not whether the
scientist had an intent to deceive.  Rather, it was whether the act
was a serious violation of community standards.  We would have
welcomed the committee's thoughtful consideration of what it was
about the act itself (that is, the length of the passage, the role
of the passage in the proposal, the community's expectations for
inexperienced scientists, or some combination of factors) that made
it insufficiently serious to be misconduct.  Unfortunately, we
were left to develop our assessment of the act without much help
from the senior scientists acquainted with the ethical environment
in which the subject worked.

Making good arguments about these two kinds of seriousness is
central to investigating and adjudicating misconduct cases wisely
and to articulating the common law of the scientific community.
Thinking well about seriousness requires reflecting on the
community's ethical  standards.  There are no formulae for
calculating seriousness.  Scientists who ask for specific, highly
codified rules defining misconduct seem to want standards that can
be enforced without judgment.  Thus, they seek to omit reference
to "vague" terms such as "seriousness" in judging misconduct.  In
doing so, they unwittingly press for a regime of rules that would
not truly reflect the subtlety of the ethical norms actually
operative among practicing scientists.  We doubt that these rules
could be so simple to apply as to prevent poor uses of judgment.
We believe it is far preferable to face squarely the necessity for
judgments about community standards and to encourage reasoned and
responsible exercise of judgment than to pretend that the exercise
of judgment can be eliminated from misconduct cases or to covertly
exercise judgment in ways that avoid scrutiny.  Thoughtful
discussions of seriousness, in investigation reports and elsewhere,
are a good place to start.


Plagiarism and Violating the
Confidentiality of Peer Review

We were informed that a subject had submitted a proposal (proposal
2) that contained considerable text, as well as figures and
tables, that was copied from a proposal (proposal 1) that the
subject had received for panel review the year before he submitted
proposal 2. Proposals 1 and 2 were submitted to the same NSF
program office and both were funded.  The text that was copied into
the subject's proposal retained references to software only
available at the firm that submitted proposal 1 and references to
figures that were found only in proposal 1.

In response to our inquiry, the subject told us that he was unaware
of the copying.  He had hired an undergraduate student to work with
him on the proposal.  The student would draft a section and then he
would review it, making editorial corrections.  They repeated this
process, section by section, for the entire proposal.  The subject
admitted that he had provided the student with proposal 1 and said
that he thought this was standard practice but said the student had
copied the material from it into his submission without the
subject's knowledge.  We considered it highly unlikely that the
iterative process he described could have resulted in the verbatim
copy of text from proposal 1 that appeared in his proposal.  We
concluded that there was substance to these allegations and, at
the university's request, we deferred our investigation until it
completed its own.  The university accepted the subject's statement
that he had given the NSF proposal to the student who committed the
plagiarism.  It concluded that the subject had committed misconduct
in science when he violated the confidentiality of peer review by
giving proposal 1 to the student. After reviewing the university's
investigation report, we concluded that an on-site investigation by
our office was required.

The subject told us that he hired the student based on a
recommendation from another faculty member and gave proposal 1 to
the student as a good example of how such a proposal should be
written without considering the confidentiality associated with
proposals received for peer review.  He said he had paid the
student from his university research funds and that they began
working on the proposal about 6 weeks before the NSF deadline.  He
claimed only to have written those parts that did not contain
copied material and could not explain how the copied material,
which constituted the proposed work, had appeared in the proposal.
He said he had not noticed the references to the software in the
proposed work and blamed the departmental secretary for the
references in his proposal to the figures in proposal 1.

The other faculty member denied recommending the student to the
subject.  According to the university's records, the student was
not enrolled when the proposal was written.  There were no
financial records or timesheets to show that the student was paid
for this work.  We contacted the student, who said he had returned
to his native country before the PI claimed he began working on the

The subject had submitted a proposal to the same NSF program office
in competition with proposal 1 the year before proposal 2 was
submitted.  The earlier proposal was declined.  The material copied
from proposal 1 into proposal 2 was directly responsive to the
reviewers' criticisms of this earlier proposal.

We found that the subject was an experienced reviewer for NSF who
had participated in 2 review panels and reviewed a total of 35
proposals.  We did not find it believable that a senior faculty
member who had such extensive reviewer experience and who had
submitted several proposals to NSF was unaware of the
confidentiality associated with peer review.

We concluded that a preponderance of the evidence showed that the
subject had knowingly violated the confidentiality of the peer
review process and that he alone had willfully plagiarized from the
proposal received for peer review into his own to improve his
chances of receiving NSF support.  We viewed his actions as more
serious because he failed to accept responsibility for them.  He
attempted to blame a student, who was not in the country when the
proposal was written, for the copying and a secretary for his
proposal's inappropriate references to figures found only in
proposal 1.

We recommended that the Deputy Director conclude that the subject
committed misconduct in science, debar him from receiving federal
funds for a period of 3 years, and prohibit him from participating
in peer review for a period of 5 years.  We also recommended that
NSF recover the awarded funds from the university.

Misconduct Finding for
Human Subjects Violations

Three families that had been interviewed under an NSF-funded
research project complained to the PI's university that she had not
fulfilled her promise to pay them for their participation.  When
attempts to resolve the complaint were unsuccessful, the PI's
department chairman referred the matter to the university for
investigation.  The university found that the subject had misused
funds and equipment, violated requirements for the proper treatment
of human subjects, and failed to cooperate with the university's
investigations.  The university also concluded that there was no
evidence that the PI had done the work she had proposed to NSF.
The PI moved to another institution before the university's
investigations were completed, and therefore the university took
no action against her.  The university recommended that NSF conduct
its own investigation, noting that the PI's failure to cooperate
had hindered the university's investigation.

A scientist and an investigator from our office conducted an
investigation at the PI's new institution that largely reaffirmed
the university's findings.  We determined that the PI had failed to
respond to requests for information made by her university's
Institutional Review Board for the Protection of Human Subjects
(IRB); failed to pay research participants as promised; and, in one
instance, failed to obtain school system approval for research
involving secondary school students.

We concluded that the PI's failures to comply with regulations for
the protection of human subjects, taken together, were a serious
deviation from accepted practices and recommended that NSF make a
finding of misconduct.  The evidence also indicated that the PI's
misconduct was part of a pattern of habitual disregard for her
obligations under her NSF grant.  Instances of this pattern
included her decision to use her grant funds without NSF's approval
for related studies and not for the research she proposed to NSF,
misuse of funds from a bank account reserved for compensating
research participants, and failure to secure the return or
safekeeping of equipment purchased under the grant that was the
property of her university.

NSF accepted our conclusions and recommendations.  It found that
the PI's human subjects violations were misconduct in science;
reprimanded her; and, to protect NSF's interests as well as those
of human subjects, imposed special conditions on any awards she
receives before January 1, 1998.  This case illustrates the
usefulness of the federal misconduct regulation in helping IRBs
protect human subjects from abuse, in those situations in which the
IRB is not able to exert its own authority.




                                   FY 1995        FY 1995
                                   First Half     Last Half

Active Cases From
Prior Period                            80             81

Received During Period                  27             27

Closed Out
During Period                           26             32

In-Process at End of
Period                                  81             76


Proposal Submitted to NSF
Contains Material Plagiarized
From Four Other NSF Proposals

We received an allegation that portions of a proposal submitted by
an assistant professor at an eastern college were plagiarized from
a proposal that originated at another institution.  The subject's
proposal, a request for funding through NSF's Instrumentation and
Laboratory Improvement program, was not funded.

Consistent with NSF's position that awardee institutions bear
primary responsibility for preventing and detecting misconduct, we
informed the college of the allegation so it could further
investigate this matter.  The subject informed the investigating
committee that he had been given two proposals from the other
institution.  He admitted that he had incorporated 32 lines of
introductory material from one of the proposals.  However, he
claimed that because of time constraints, he had not rewritten the
paragraphs in question.  The committee concluded that the subject
had not intended to plagiarize the material.

We found that the college did not sufficiently investigate how the
subject used two proposals in preparing his own.  Also, the college
uncritically accepted the subject's statement of his lack of intent
to plagiarize.

We opened our own investigation and found that, in addition to the
introductory material from the first proposal, the subject had
extensively plagiarized from the second proposal from the other
institution.  The subject admitted that he had plagiarized major
portions of his proposal, including much of the scientifically
substantive portions of the proposal.

Thereafter, the college reopened its investigation and found that
in addition to the two source proposals from the other institution,
the subject had plagiarized from two proposals that originated from
the subject's department at the college.  Although the subject
copied only short passages of background material from these two
departmental proposals, the committee believed that the use of this
material was inappropriate because the subject worked on the
proposal alone and did not have permission from the authors of the
other proposals to copy any material.  Moreover, the committee
found that 65 percent of the subject's proposal had been copied
from the four source proposals.  The committee concluded that the
subject had committed plagiarism.

We believe the subject's largely verbatim adoption of major
substantive portions of two proposals that originated from another
institution and lesser portions of two departmental proposals is a
serious instance of plagiarism.  The evidence, including the
subject's description of how he prepared his proposal, supports a
finding that he acted knowingly. Therefore, we recommended that NSF
make a finding of misconduct, specifically plagiarism; reprimand
the subject; and debar him from receiving federal grants for 1
year.  We also recommended that NSF prohibit the subject from
serving as an NSF reviewer or consultant during his 1-year

This case illustrates the importance of checking the available
evidence for possible misconduct beyond the scope of that initially
alleged.  It is insufficient to rely on the subject's word that the
misconduct is limited to the original allegation.  Moreover, this
case illustrates why a finding of misconduct should not require the
subject's admission of intent to deceive. Knowing conduct or gross
negligence can be inferred from the nature, extent, and repetition
of the subject's actions.

Plagiarism Falsely
Attributed to Student

We received an allegation that a faculty member at a southern
university had plagiarized his NSF proposal from an award that
another PI had received from another federal agency.  Most of the
text of the proposal was either substantially similar or identical
to the text in the award.  We learned that the subject may have
received a copy of the award from one of his former students who
had worked with the PI on the award because the PI had a practice
of providing copies of his funded proposals to members of his
research team.

In response to our request for information about the allegation,
the subject asserted that another of his former students (the
student) had written the proposal.  According to the subject, the
student was terminated before he completed his graduate degree.
After his termination, the student allegedly approached the subject
and volunteered to write the proposal for a field of research that
interested the subject, but in which the subject was not an expert.
The subject maintained that his participation in the preparation
of the research proposal was minimal, and that he submitted the
proposal as his own with the student's permission.

We referred this allegation to the university for investigation.
As a part of its investigation, the university learned from the
student that he

     knew nothing of the proposal or the award,

     was unfamiliar with the field represented by the proposal,

     had never been a graduate student at the author's institution,

     was employed in another city at the time the subject said he
     wrote the proposal.

The university determined that the subject committed misconduct in
science when he plagiarized almost all of the text from the award
and that he misrepresented to NSF that the student had written the
proposal.  The subject resigned from the university and therefore
the university took no further action.

We wrote to the subject to provide him an opportunity to respond to
the university's investigation.  The subject responded by
reiterating his story that he had been "duped" into believing that
the student had written the proposal. We contacted the student, who
reconfirmed what he had told the university during its
investigation: that he had not written the proposal and that he
knew nothing about this specific field of science.  Our
investigation verified that the student's evidence was reliable. We
concluded that a preponderance of the evidence showed that the
subject had committed plagiarism when he copied, and submitted as
his own, the work of another and that he had acted knowingly.

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 NSF send the
subject a letter of reprimand and that he be debarred from
receiving any government grant support for 3 years.  These
recommendations are awaiting NSF's action.

Plagiarism of Proposals
Received in Confidence

We received allegations that two NSF proposals from the same
department contained plagiarized material.  One person was a co-PI
on both proposals, and our inquiry indicated that she was
responsible for the alleged plagiarism.  In each case, the subject
allegedly plagiarized material from proposals that NSF had sent her
in confidence for merit review.  We deferred our investigation to
give the subject's university an opportunity to investigate the

The university found that the subject committed misconduct.  It
prohibited her from submitting research proposals of any kind or
accepting research support for projects in which she was the sole
investigator for 1 year, barred her from engaging in peer review of
any kind for 2 years, barred her from receiving support for new
graduate students for 1 year,  froze her salary for 2 years,
reprimanded her, and informed her that it would immediately dismiss
her if she engaged in further misconduct.

We recommended that NSF also make a finding of misconduct.  We
further recommended that NSF reprimand the subject and either debar
her from receiving federal grants for one year or enter into a
1-year voluntary exclusion agreement with her.  We also recommended
that, for 1 year after the debarment or voluntary exclusion ends,
NSF require that, when the subject submits a proposal, she ensure
that her department chairperson signs an assurance stating that her
proposal does not contain any plagiarized material and certify in
writing that she has recently reviewed the definition of misconduct
in NSF's Misconduct in Science and Engineering regulation, that she
has not committed misconduct in preparing the proposal, and that
the proposal has been reviewed as described above.  We recommended
that NSF prohibit the subject from serving as a mail or panel
reviewer or as a member of a Committee of Visitors for 3 years.

We believe the source of the plagiarized material, the existence of
two separate incidents of plagiarism, and the subject's failure to
offer a full and frank explanation of these incidents make this a
very serious case.  In our view, NSF should take strong action
against persons who commit misconduct that involves violation of
the integrity of its confidential peer review process.

Misrepresentation of Academic
Credentials in NSF Proposal

An eastern university informed us that it had initiated an
investigation into an allegation that a PI had misrepresented his
terminal degree in an NSF proposal.  The university appointed a
committee to investigate the allegation.  The committee found that
the subject had committed misconduct in science when he claimed to
have a Master's degree, which he did not.  The university
determined that the subject had not received any financial benefit
from the award and had successfully completed the proposed work.
The subject resigned from the university before the committee
completed its investigation. Consequently, the committee
recommended no actions in the case.

Our investigation agreed with the committee's conclusion.  We
considered that the award was not for research, and it did not
require that the recipient have a Master's degree.  We believe the
subject might apply for NSF funds again.  We recommended that

     the Deputy Director find that the subject committed misconduct
     in science,

     the subject receive a letter of reprimand, and

     the subject be required to certify to NSF for 3 years on any
     proposal he submits as a PI or co-PI that information
     contained in the proposal is correct.

These recommendations are awaiting NSF's action.


Plagiarism in Three
Proposals Submitted to NSF

In Semiannual Report Number 12 (page 29), we discussed a case in
which a PI had plagiarized from a source proposal into three
proposals that he submitted to NSF.  The amount of material
plagiarized was substantial. The Deputy Director found that the
subject committed misconduct and debarred him from receiving
federal grant funds for 1 year.  She also excluded the subject from
participating as an NSF panelist, reviewer, advisor, or consultant
during the debarment period.  Since the incident of plagiarism, the
subject has moved to a new institution. Because debarment is a
serious and public sanction, we recommended that the Deputy
Director inform the PI's new institution that the sanction had been
imposed on an individual currently in its employ.  However, the
Deputy Director decided that informing the new institution about
this PI's misconduct would be an unnecessary and punitive
additional sanction and so she declined to take this action.

Misrepresentations of Publications
in Proposals Submitted to NSF

In Semiannual Report Number 12 (page 31), we discussed a case in
which a PI had submitted a proposal that misrepresented the status
of several manuscripts as "submitted" when they had not been.  Our
investigation revealed that the misrepresentations in the NSF
proposal were part of a broader pattern of misrepresentation by the
subject.  The Deputy Director concluded that the subject's false
statements to NSF constituted falsification and a serious deviation
from accepted practices.

The Deputy Director found that the subject had committed misconduct
in science and required that, for the next 3 years, when the
subject is named as a PI or co-PI on an NSF proposal, he must
certify, and his department chairperson must assure to the best of
his or her knowledge, that the proposal does not contain any false
statements.  This certification and assurance must be made
separately and confidentially to the Assistant Inspector General
for Oversight.

of Credentials

In Semiannual Report Number 12 (page 32), we discussed the case of
a PI who submitted a proposal in which he falsely claimed to have
a Bachelor of Science degree.  NSF's Deputy Director concurred with
our recommendations in this case.  She found that the subject
committed misconduct and sent him a letter of reprimand.  In
addition, the Deputy Director required that, until September 1,
1996, the subject, when he submits a proposal to NSF, must certify
separately and confidentially to the Assistant Inspector General
for Oversight that all the information in the proposal is correct
to the best of his knowledge.


University Finds No Misconduct
in Authorship Dispute

A university informed us that it planned to investigate allegations
of misconduct by an NSF-supported PI.  The PI had collaborated on
a research project with a postdoctoral fellow who had visited her
laboratory.  The most serious allegation was that the PI, without
her collaborator's knowledge or consent, had changed the order in
which the authors were listed (and thus the credit each author
received) on a paper based on their collaborative research that she
submitted for publication.  We agreed to defer our own
investigation and advised the university that, in cases of alleged
misconduct, we were concerned about whether the subject deviated
from accepted practice and, if she did, whether the deviation was

Drawing on its own knowledge of the scientific community and the
testimony of a senior scientist respected by both the PI and the
postdoctoral fellow, the investigating committee concluded that
PIs, when submitting papers for publication that report research
done exclusively in their laboratories, have broad discretion in
deciding the order of authorship.  The committee determined that
the PI's failure to notify her collaborator or seek the
collaborator's approval did not violate a "commonly accepted
practice."  The university and OIG accepted the committee's
judgment and concluded that no misconduct had occurred.  However,
the committee opined that the subject's actions, though not
misconduct in science, fell "below the standard of conduct [the
university] should expect of its faculty" because they did not
"foster an environment in which its faculty encourage and assist
students and post-doctoral fellows in their academic and
professional development."  The committee recommended that the dean
encourage the PI to behave more appropriately.

This case illustrates the role that assessments of seriousness play
in misconduct investigations and shows that investigating
committees can use such assessments to decide cases.  It also
illustrates that some actions, though not serious enough to warrant
a finding of misconduct by NSF, involve failure to adhere to high
ethical standards that should concern officials at the university

Professional Society
Conducts Investigation

The president of a professional society informed us that the
society had received an allegation of plagiarism in a proposal that
resulted in an NSF award to the society.  The society asked that we
defer our investigation to permit a committee of academic
scientists appointed by the society to investigate the allegation.
Because the two PIs on the award were officers of the society, we
took special precautions to guard against real or perceived
conflicts of interest that could damage the credibility of the
society's investigation and make it impossible for us to use the
investigation's findings.  We routinely examine whether the members
of investigating committees have relationships with either the
subjects or the complainants that would create a conflict of
interest.  In this case, we also requested detailed information
about the committee members' relationship to the society's
governing council and the scientists in the executive office.  We
concluded that there was no reason to doubt the committee's
ability or willingness to conduct an unbiased investigation.  As a
result, we agreed to defer our own investigation.

The text that was allegedly plagiarized was originally part of an
NSF-funded proposal from a PI at a university for a science
education project.  The project's director wrote a proposal adapted
from the PI's original text to apply for renewed NSF funding.   The
project director supplied the society's PIs with a copy of the
renewal proposal and gave them permission to borrow wording from
the text of the renewal proposal in preparing their own submission.
They treated this as authorization to use verbatim excerpts from
the renewal proposal without attribution, which might not have
raised a complaint had the project director been a PI on the
society's proposal, as the society's PIs had originally planned.
However, they changed their plan, with the project director's
concurrence, and made him a consultant instead.

The investigating committee found that the society's PIs and the
project director should have kept the university's PI better
informed about their collaboration and should have cited the
source of all passages taken verbatim from the university's renewal
proposal.  Nonetheless, the society concluded that the actions of
the society's PIs did not rise to the level of misconduct, noting
that the PIs clearly indicated in their proposal that their
project was based on the university's project, knew that the
project director had informed the university's PI that the society
was developing a related project, had reason to believe they were
authorized to use the text in question, and sought the
university PI's support for their NSF proposal when they submitted
it and eventually secured a letter of endorsement from him.

The investigating committee reprimanded the PI who wrote the
society's proposal for omitting proper citations to the
university's proposal.  It also said that "it would have been
appropriate and courteous" for the PI and her co-PI to have
informed the university's PI that they were submitting a related
proposal under the auspices of the society before they actually did
so.  At the committee's suggestion, both of the society's PIs sent
notes of regret to the university's PI.  The committee further
stated that the project director should have more fully informed
his project's PI of his role in the society's project.  We accepted
the committee's judgment that no one had committed misconduct in
science, although we assigned slightly different weight than the
committee to the different justifications it gave for this

This case is significant because it is the first time we have
relied on an investigation performed by a professional society.  We
agree with the committee that some ethical transgressions occurred
that were not serious enough to be misconduct and warrant NSF
action, but that should be acknowledged and corrected.

Property Dispute

A subject submitted a proposal to NSF that contained
acknowledgments for two figures, selected scientific data, and
reagents to be used if the proposal were funded, to another
scientist (the PI) and the PI's collaborator. It was alleged that
the PI had neither given the subject permission to reproduce the
figures, which he claimed came from his NSF award, nor provided the
data or agreed to provide the reagents. The subject said he had
received permission from the PI's collaborator to reproduce the
figures and the data, and the collaborator had agreed to provide
the reagents if the subject's proposal was funded.  The subject
identified the PI's collaborator as also being his collaborator;
however, the collaborator's work with the subject was independent
of his work with the PI.

The collaborator confirmed the subject's information.  The
collaborator said he had asked for, and received, permission from
the PI to reproduce the figures in the subject's proposal and had
orally relayed that permission to the subject.  The collaborator
had also provided the data, which were freely available from
scientific advertisements and product support literature, and had
agreed to provide the reagents to the subject.

We concluded that the subject had appropriately acknowledged the
sources of the information in his proposal.  The case was reduced
to a dispute between the PI and his collaborator about whether the
PI had given the collaborator permission to use the information.
We recommended to the collaborator and PI that obtaining and
giving written permission to use such materials could help avoid
such disputes in the future.  We concluded that this dispute did
not rise to the level of misconduct and closed the case.

Plagiarism Between

A subject submitted a proposal that contained a page and a half of
introductory text that was copied from another scientist's
unpublished manuscript.  The introductory text was not indented,
and there was no citation to the manuscript. The other scientist's
manuscript had been rejected for publication before he showed it to
the subject, who then made suggestions on how to improve it.  The
work described in that manuscript became the basis for a
collaboration between the two.  The other scientist was responsible
for writing the draft of a new manuscript that described the
results of their collaboration.  He acknowledged that the subject
had requested that the introductory text found in the original
manuscript appear in the new manuscript.  When the subject wrote
his proposal, the new manuscript had not been written.  However,
based on their collaboration, he felt free to use in his proposal
material from the rejected manuscript that he expected to be in the
new manuscript.  At our request, the subject amended his proposal
to include a citation to the rejected manuscript and offset the
copied text in the proposal.

We were also informed that one of the studies described in the
subject's proposal was already completed.  The complainant could
provide no solid evidence to support the allegation.  The subject
informed us that he had completed a pilot study, and he considered
it preliminary data for the full study described in the proposal.

It was his understanding that NSF encouraged PIs to include
discussions of preliminary data in their proposals.  We agreed with
the subject.

We concluded that the subject's copying text that he presumed would
be in a manuscript he was co-authoring and his discussing
preliminary data in his proposal were not misconduct in science.
We concluded that the two scientists had begun a collaboration that
had evolved into a turf battle between the two.  In a healthy
collaboration, these allegations would not have arisen.


Oversight scientists and engineers presented two invited papers:
one on federal agency definitions of misconduct in science to the
Department of Health and Human Service's Commission on Research
Integrity at its June meeting in Chantilly, Virginia, and the other
on NSF's response to misconduct in science to an April Colloquium
on Research Integrity in Montreal, Canada.

In addition, the scientific staff organized a session and presented
a paper on how NSF handles allegations of misconduct in science at
the annual meeting of the American Sociological Association in
Washington, D.C.; delivered a paper on how the federal government
deals with misconduct in science at the annual meeting of the Law
and Society Association in Toronto, Canada; and presented a paper
on the same subject at Amherst College. They also spoke on OIG's
inspections and evaluations program at the annual meeting of
representatives from institutions served by the Independent
Colleges Office.

To familiarize NSF with the OIG, scientists and engineers from the
Oversight Office have discussed OIG's organization and activities
with eight groups of NSF's professional staff in research and
education and have served as senior resource staff at an NSF
Program Management Seminar for new program managers and other new
professional staff.

Through workshops, lectures, and seminars, staff have also
participated in efforts to apply the requirements of the Government
Performance and Results Act.



Number of Cases Requiring
Assurances at End of Period             5

Number of Cases Requiring
Certifications at End of Period         8

Assurances Received During
This Period                             1

Certifications Received
During This Period                      2

*  NSF accompanies some findings of misconduct in science with a
certification and/or an assurance requirement.  For a specified
period, the subject must confidentially submit to the Assistant
Inspector General for Oversight a personal certification and/or 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 certifications and assurances
remain in the Office of Inspector General and are not known to, or
available to, NSF program officials.



During this reporting period, we conducted a review to determine
whether a limited-term employee had improperly made funding
decisions despite a conflict of interest.  The results of that
review follow.

Limited-Term Employee Violated
Conflict Of Interest Regulations

In March 1995, we received an allegation that a limited-term
employee under the Intergovernmental Personnel Act (IPA) at NSF
participated in decisions involving his home institution.  The IPA
worked for a science education program. When the IPA joined NSF in
June 1994, he submitted a letter to the director of his science
program recusing himself from any matters involving his home
institution.  In September 1994, the Designated Agency Ethics
Official (DAEO) issued a letter to the IPA reiterating that he was
"disqualified from participating--by decision, approval,
disapproval, recommendation, or rendering of advice--in any matter
involving" his home institution.

The IPA evaluated science proposals recommended for funding by peer
reviewers, including two from his home institution.  In managing
the evaluations of the proposals, the IPA made recommendations to
cut funding for some of the proposals but recommended that one of
the proposals from his home institution receive full funding.  We
determined that, although the IPA avoided taking part in deciding
whether to initially fund the two proposals from his home
institution, he did participate personally and substantially in the
process for deciding on the funding level for these proposals.

As a result of our findings, NSF reevaluated the funding levels for
all of the recommended proposals in the program.  In addition, the
Deputy Director issued a letter of reprimand to the IPA and
required that he meet with the DAEO for a counseling session.  The
Deputy Director also informed the individual that his IPA agreement
would not be extended.  Further, the individual is not permitted to
participate in a funded capacity as a PI, co-PI, or equivalent, on
the awards in question.

We also recommended certain changes in the system NSF uses to
identify potential conflicts IPAs may have and ensure that visiting
scientists comply with conflicts rules.


Our inspections are on-site reviews conducted at NSF or at
organizations that receive NSF funding.  Inspections' findings and
recommendations highlight what works well and identify problems or
deficiencies so that managers at NSF and the funded organization
can improve their operations and better achieve research and
education goals.  Inspection teams look for early indications of
financial, administrative, or compliance problems so they can be
addressed before they become so serious that their resolution
requires an audit or investigation.

We designed our inspections program to improve our understanding of
NSF's grantee activities by integrating financial, administrative,
and program analyses in a single review.  We view inspections as an
effective approach because they allow us to determine whether NSF's
program goals are being achieved as well as review the financial
and administrative management of NSF awards.  Inspections are
conducted by multidisciplinary review teams that may include
scientists, engineers, auditors, computer specialists,
investigators, lawyers, and management/program analysts.

During this reporting period, we conducted inspections at a state
university and at a primarily undergraduate, liberal arts college.
Summaries of the results of those inspections and institution
responses follow.

Inspection at a State
University in the Southwest

We reviewed nine grants that NSF's EHR awarded to a state
university located in an urban area that has a population of over
1.2 million and within a county where minorities represent over 57
percent of the population.  The Directorate awarded the university
these grants to improve the science, mathematics, engineering, and
technology education of undergraduate students and some were
specifically aimed to improve minority students' access to research
and research careers.

The university's accounting records for cost sharing on equipment
purchases were notably good.  The university summarized the cost
sharing for equipment in separate accounts for each grant and
clearly supported its portion of the costs with vendor invoices.

While the university generally complied with NSF's and other
federal award requirements, we were concerned with the university's
application of federal cost principles regarding pay rates for
intra-university consulting.  The university charged one of our
grants for two faculty members' salaries at a rate that was double
their regular pay rate.  The university did not agree with our
finding that intra-university consulting rates cannot exceed the
regular pay rate.  NSF's Division of Contracts, Policy, and
Oversight agreed with our interpretation of OMB Circular A-21
regarding this finding but also acknowledged to the university
that NSF's Grant Policy Manual did appear to equate
intra-university consulting with external consultants for which a
higher pay rate is allowed.  NSF has revised the Grant Policy
Manual and removed the confusing language.

As a result of our recommendations, the university agreed to ensure
that its revised policies and procedures for handling allegations
of misconduct in science and engineering will meet the requirements
of NSF's misconduct regulation, its rules of evidence will be
clarified, and that all faculty members and students will be better
informed about the university's policies and procedures.  Also, the
university reported that it is developing policies and procedures
that will provide appropriate and necessary access to, and
safekeeping of, all research data generated by projects funded by
external organizations.

Inspection at a Primarily
Undergraduate Northeastern College

This inspection included 13 awards from 4 NSF directorates and 1
staff office in the Office of the Director.  Five of the awards
involved the development and/or dissemination of curricular
innovations, four supported faculty members' research, two
recognized outstanding faculty achievement, one supported a summer
program to offer Research Experiences for Undergraduates, and one
was for the renovation of the College's chemistry laboratory.

A major focus of the program portion of our inspection was on how
well NSF serves the needs of scientists and science students at
liberal arts colleges.  College faculty members and NSF program
officers agreed on the criteria NSF should apply in deciding
whether to support research proposals from primarily undergraduate,
liberal arts colleges.  They affirmed that such research proposals
should only be supported when the research is comparable in quality
to other funded proposals from larger, research-oriented
universities.  Our review indicated that NSF program officers were
receptive to strong research proposals from liberal arts colleges,
but that not all College faculty members were confident of this.

Our review of NSF projects that supported innovation in
undergraduate education examined ways NSF could enhance its efforts
to foster communities of scientists who build on one another's work
in curriculum development.  We also learned that NSF's
administration is uneven for awards from cross-disciplinary
programs, including awards that recognize outstanding achievement
(this inspection included a Presidential Young Investigator Award,
Faculty Award for Women, and PI who had received a Visiting
Professorship for Women).  However, College faculty members who had
received outstanding achievement awards from NSF felt that these
awards had big effects on their careers.  For example, the awards
helped faculty members form collaborative relationships with
prominent scientists and acquire state of the art equipment that
enabled the faculty members to revitalize their research.

The College generally complied with NSF's and other federal award
requirements.  We did find one material instance of noncompliance
in that the College did not have time and attendance records to
support the faculty members' and research assistants' salaries
charged to NSF grants.  The College agreed to establish such
records but stressed that, despite the absence of these records, it
could demonstrate that the work in question was completed and that
compensation was within NSF guidelines.  The College did not want
its failure to complete paperwork to raise questions about
individual integrity.

The College also agreed to conduct physical inventories of
equipment, reconcile equipment records with related financial
records, and strengthen and clarify its procedures for handling
misconduct in science allegations.


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.

Legal Analysis of NSF's
Misconduct in Science Regulation

NSF's regulation defines misconduct in science as "Fabrication,
falsification, plagiarism or other serious deviation from accepted
practices in proposing, carrying out, or reporting results from
activities funded by NSF. . . ."  Although most misconduct cases
fall within the categories of fabrication, falsification, or
plagiarism, NSF implemented this definition because the agency
believed it was necessary to have a general provision such as the
other serious deviation clause, because it is impossible to predict
the nature of all of the serious unethical conduct that might
warrant agency action.  The other serious deviation clause sets up
a community standard in which the practices of the relevant
scientific community determine what is seriously unacceptable
conduct.  Examples of situations that might be serious enough to
violate the other serious deviation clause include tampering with
a colleague's experiments, misrepresenting scientific
qualifications or achievements in grant proposals, or violating the
confidentiality of the peer review process.

However, some scientists fear that the clause is too vague and
could be used to sanction scientists for conduct that they did not
know was prohibited or to punish scientists for using novel or
innovative scientific procedures.  NSF has supported the clause
because it must be able to act against any ethical deviations
related to the conduct of NSF-supported research and education
activities if they are serious from the standpoint of the
scientific community.

Therefore, the phrase "serious deviation from accepted practices"
is actually the core of the definition of misconduct, whereas
fabrication, falsification, and plagiarism are examples of serious
deviations. The phrase could not be used to sanction a scientist
for novel research or experimentation because it means "deviation
from accepted practices" in an ethical sense.  Although there have
been no findings of misconduct by NSF for the use of novel
scientific methodology, and opponents of the clause have found
little to complain about the way the clause has actually been used,
the controversy over the clause continues.

During the debate, the question has arisen whether the other
serious deviation clause would pass legal scrutiny if challenged in
court.  The U.S. Constitution requires that NSF's misconduct in
science regulation provide "due process of law."  This means that
the regulation must sufficiently inform an individual of what
conduct is prohibited; if it does not, it is "void for vagueness."
However, a legal standard is not void for vagueness just because it
does not name every type of behavior that may fall within it; the
rule need not state every circumstance that could incur a penalty.

Federal courts have invariably found that general standards of
conduct, particularly those based on community standards, provide
constitutionally sufficient warning of the prohibited conduct.  In
the leading case in the area of standards of conduct, the Supreme
Court upheld the government's standard for dismissal of tenured
civil service employees, who "may be removed or suspended without
pay only for such cause as will promote the efficiency of the
service."  The Court held that this general standard was not void
for vagueness.  It noted that "there are limitations in the English
language with respect to being both specific and manageably
brief. . . ."  The court pointed out that many well-established
codes of conduct include broad prohibitions, such as "misconduct,"
"immorality," or "conduct unbecoming."  Courts have consistently
held that such broad standards, including prohibitions of
misconduct by teachers, professors, attorneys and other licensed
practitioners, are not unconstitutionally vague when they are
interpreted in light of the practices of the community they
regulate.  Thus, such broad standards of conduct are appropriate
when directed to a specialized group, such as the scientific
community, which has its own standards of ethical practice.

NSF's procedures for handling misconduct in science cases ensure
that an agency finding of misconduct is based on an accurate
determination that the conduct seriously deviates from accepted
practices in the relevant scientific community (see Semiannual
Report Number 10, page 40).  The concept of serious deviation, as
defined by the relevant scientific community's standard of
professional conduct, is no less definite than the standards upheld
by the Supreme Court and many other courts.  Accordingly, we
believe that a court would uphold the other serious deviation
clause against a void for vagueness challenge.

We are submitting a manuscript for publication that provides a
detailed legal analysis of this issue.

Reciprocal Consulting Payments
Under Education and Human
Resources Awards

NSF's EHR Directorate sometimes funds large, geographically diverse
educational projects by giving several awards to "pilot sites" and
one award to an organization to coordinate the pilot site projects.
These awards often involve the use of consultants, and we learned
that a person working on one project may be retained as a
consultant on one of the other projects.

We had not previously encountered consulting between recipients of
funds from closely related grants, and we did not know whether this
practice is widespread.  We are unaware of any clear prohibition of
the use of federal funds for such consulting (absent fraud), but we
believe it is highly susceptible to at least an appearance of
impropriety.  Therefore, we recommended that EHR assess whether the
use of federal funds for consulting agreements of this type among
recipients of related federal awards is appropriate, and determine
what preventative action it should take if it determines that this
type of consulting is inappropriate.

EHR reviewed the matter and determined that a consulting
arrangement involving an educational association that we had
identified was an isolated incident.  EHR explained "that EHR
strongly believes that the use of federal funds for consulting
among recipients of related awards is appropriate when some of the
expertise for the success of one award is resident in the project
team of the other award, so long as there is no means of coercion
applied or conflict of interest, either in fact or perception."
EHR has prepared written guidance to accompany award letters for
all EHR-funded projects where consultants play a significant role
and where grants may be linked under some administrative umbrella.
EHR also asked the education association we identified to provide
detailed information about consulting expenses to date and required
that the association have all future consulting arrangements
approved in advance by the NSF program officer.


In Semiannual Report Number 12 (page 43), we discussed the fact
that scientists assigned to NSF under the Intergovernmental
Personnel Act (IPA) are not covered by the government's financial
disclosure requirements or the standards of ethical conduct that
apply to federal employees under the Ethics in Government Act.  We
recommended that NSF develop and implement a contractual agreement
that requires that IPAs file financial disclosure forms that are
appropriate to their NSF position and comply with the standards of
ethical conduct promulgated by the Office of Government Ethics
(OGE).  We also recommended that the contractual agreement formally
notify IPAs that NSF may take disciplinary and/or corrective
actions for violations of ethical standards.  During this reporting
period, the House Committee on Science added a provision to the NSF
Authorization Act of 1995 that subjects IPAs to the financial
disclosure requirements under the Ethics in Government Act.  The
bill awaits congressional passage and signature by the President,
but we are hopeful that it will become law soon.

In the meantime, NSF's OGC has been working with OGE to promulgate
NSF regulations that will apply many of the ethical requirements to
IPAs.  In addition, in response to our recommendations, NSF agreed
to require that IPAs file financial disclosure forms and comply
with ethics rules, and NSF agreed to notify IPAs that appropriate
administrative sanctions will be applied to enforce the ethics and
financial disclosure rules.  However, by the close of this
semiannual reporting period, our recommendations had not been


Avoiding Grassroots Lobbying

Federal law (18 U.S.C. Sec. 1913) prohibits the use of federal
funds by government employees to encourage grassroots lobbying.  We
learned that an NSF program officer had sent an electronic message
that might have been perceived as encouraging some of her grantees
to contact their congressional representatives to dissuade them
from supporting a pending bill that would have severely cut funding
for the program.

Although we concluded that the law had not been violated in this
instance, we wanted to ensure that, in accordance with
OGE regulations, employees were "endeavor[ing] to avoid any actions
creating the appearance that they are violating the law. . . ."  In
the current budget climate, we also felt that it was reasonable to
expect that other NSF program officers might be tempted to engage
in similar conduct if they were unaware of the prohibitions of
section 1913 and the ethics regulations.  In response to our
recommendations, NSF distributed a legal advisory on grassroots
lobbying to all Division Directors and Program Officers.

Investigator Financial
Disclosure Policy Finalized

In Semiannual Report Number 11 (page 40), we discussed NSF's
adoption of an investigator financial disclosure policy.  This
policy requires that an institutional representative certify that
the institution has implemented an appropriate conflict of interest
policy, all required financial disclosures have been made, and
either no actual or potential conflicts exist or all actual or
potential conflicts have been managed satisfactorily or disclosed
to NSF. During this reporting period, NSF amended its policy to
conform with that of the Department of Health and Human Services.
NSF revised the policy as follows.

     Rather than requiring that the PI determine whether a
     financial interest would "directly and significantly affect
     the design, conduct or reporting of" NSF-funded activities,
     the policy now requires the institutional reviewer to make
     this determination.

     Conflict management is now required before funds are
     spent rather than before the award is funded.  This will
     eliminate the need for institutions to review and resolve
     conflicts for rejected proposals.

     The dollar threshold for excluded equity interests was
     increased from $5,000 to $10,000.

     A certification is now required only from the
     institutional representative, not from PIs and co-PIs.

     The policy was extended to apply to large, ongoing
     projects, such as centers.

NSF's Policy was effective on October 1, 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 this
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.


NSF and CPA Performed Audits

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.

                         Report    Questioned     Unsupported
Number    Grantee        Issued         Costs           Costs

95-1043   National
          Association    05/30/95       358,428              0

95-1044   Discovery
          of Idaho       04/25/95             0              0

95-1045   H-Tech
          Inc.           09/29/95        11,821              0

95-1046   Joint
          Institutions   09/01/95        14,229              0

95-1047   American Society
          of Mechanical
          Engineers      09/01/95        65,283         61,767

95-1048   Virginia State
          Department of
          Education      09/01/95       317,664        183,316

95-1049   Courtesy
          Travel Service,
          Inc.           09/15/95        33,406              0

95-1050   American
          Systems, Inc.  09/29/95       122,263              0

95-1051   Edison Chouest
          Offshore       09/15/95       646,266              0


Audits are designated as Internal when we review NSF operational
activities or findings and recommendations of a policy nature
resulted from the review and are directed to NSF management.

                         Report    Questioned     Unsupported
Number    Grantee        Issued         Costs           Costs

95-2105   IPOD/ODP
          Trust Fund
          Report         05/08/95             0              0

95-2106   Ocean
          Trust Fund
          Report         05/08/95             0              0

95-2107   Logistics Issues
          Related to the
          U.S. Antarctic
          Program in
          New Zealand
          Antarctica     05/31/95             0              0

95-2108   Conference
          Procedures     09/18/95             0              0

95-2109   Management
          Found in
          Reviews        09/29/95             0              0


                         Report    Questioned     Unsupported
Number    Grantee        Issued         Costs           Costs

95-4074   American Society
          for Biochemistry
          & Molecular
          Biology        09/05/95             0              0

95-4075   Quality
          Minorities     09/05/95             0              0

95-4076   Woods Hole
          Center,Inc.    09/05/95             0              0

95-4077   Playing
          to Win         09/05/95        24,260          8,107

95-4078   Applied
          Council        09/05/95             0              0

95-4079   California
          Foundation     09/28/95             0              0

95-4080   Nantucket
          Association    09/28/95             0              0


We processed 236 reports provided by other federal agencies.  These
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

95-5503   Elizabeth City
          University     04/24/95         7,367              0

95-5544   University of
          Fairbanks      05/26/95        13,639              0

95-5553   Carnegie
          University     05/22/95        39,520              0

95-5583   Pennsylvania
          ('92)          05/31/95         4,273          4,273

95-5586   Sacred Heart
          University     05/31/95         1,586              0

95-5592   Pennsylvania
          ('90)          06/13/95         4,646          4,646

95-5596   Ohio State
          University     06/13/95        54,066              0

95-5599   University of
          Hawaii ('93)   06/13/95        31,104              0

95-5602   Stanford
          University     06/13/95           206              0

95-5639   Stanford
          University     06/20/95         3,458              0

95-5645   University of
          Hawaii ('92)   06/21/95         7,297              0

95-5658   State of
          Arizona        06/27/95            26              0

95-5674   New Jersey
          of Technology
          ('92)          08/31/95           688              0

95-5681   Morehouse
          of Medicine    08/31/95           275              0

95-5692   Clark
          University     08/31/95         1,387              0

95-5698   University of
          Notre Dame     09/01/95         1,374              0

95-5700   Tennessee State
          Institute      09/01/95        15,994              0

95-5704   State of
          North Dakota   09/18/95        18,726              0

95-5722   State of
          South Dakota   09/22/95       113,204              0


Reports in this section are the results of surveys that did not
result in a recommendation for full audit but contained questioned

                         Report    Questioned     Unsupported
Number    Grantee        Issued         Costs           Costs

95-6001   General
          Atomics        07/14/95        57,595              0

95-6002   Montana
          Council of
          Teachers of
          Mathematics    09/12/95         1,000              0

95-6003   Zoological
          Philadelphia   09/12/95           996              0

95-6004   Montgomery
          Schools        09/12/95         3,055              0

95-6005   Canyon Ferry
          Institute      09/12/95        58,689              0

95-6006   Maryland
          Television     09/12/95         9,509              0

95-6007   American
          for the
          of Science     09/25/95        29,355              0

95-6008   American Indian
          Science &
          Society        09/27/95        27,060              0

95-6009   American
          Institute of
          Sciences       09/25/95         4,918              0

95-6010   American
          Society        09/25/95         3,551              0

95-6011   American
          Association    09/25/95        18,438              0

95-6012   American
          Zoologists     09/25/95           700              0

95-6013   Biological
          Study          09/27/95         1,015              0

95-6014   Cold Spring
          Laboratory     09/27/95        39,122              0

95-6015   Computing
          Association    09/27/95         2,150              0

95-6016   Consortium for
          and its
          Applications   09/25/95         1,335              0

95-6017   Institute for
          Research on
          Learning       09/27/95         2,255              0

95-6018   Institute of
          & Society      09/27/95         4,595              0

95-6019   Los Angeles
          County Museum
          of Natural
          History        09/25/95         1,186              0

95-6020   Mathematical
          Institute      09/25/95         2,418              0

95-6021   National
          for the
          Conservation of
          Property       09/27/95         8,995              0

95-6022   National
          Association    09/25/95         9,494              0

95-6023   National Bureau
          of Economic
          Research       09/27/95           580              0

95-6024   Science
          Inc.           09/25/95         9,685              0

95-6025   Student
          USA            09/27/95         1,110              0

95-6026   Thames
          Center         09/27/95        44,303              0

95-6027   Boston
          University     09/27/95         9,256              0

95-6028   Carnegie
          University     09/27/95         7,487              0

95-6029   College of
          Notre Dame     09/27/95         6,317              0

95-6030   Colorado
          of Mines       09/27/95         2,779              0

95-6031   University of
          Connecticut    09/27/95         5,257              0

95-6032   Georgia
          Corporation    09/27/95         2,260              0

95-6033   University
          of Idaho       09/27/95         2,650              0

95-6034   University
          of Maryland/
          County         09/27/95         1,507              0

95-6035   University
          of Maryland/
          College Park   09/27/95         1,084              0

95-6036   North Dakota
          University     09/27/95         2,746              0

95-6037   University of
          North Iowa     09/27/95         1,716              0

95-6038   San Diego
          University     09/27/95           496              0

95-6039   University
          Research       09/27/95        10,000              0

95-6040   Rochester
          District       09/28/95       161,002              0

Statistical Information Required
by the Inspector General Act
of 1978, As Amended

Table I. Audit Reports Issued With Questioned Costs

                                        Questioned     Unsupported
                              Number         Costs           Costs

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

     That were issued during
B.   the reporting period.      68       2,470,122         262,109

     Adjustments to questioned
     costs resulting from
C.   resolution activities.    N/A             345             645

Subtotals of A+B+C             127       7,834,129       2,056,338

     For which a management
     decision was made
     during the reporting
D.   period.                    52       1,675,600          686,396

     (i) dollar value of
     disallowed costs          N/A         712,597              N/A

     (ii) dollar value of
     costs no disallowed       N/A         963,003              N/A

     For which no management
     decision has been made
     by the end of the
E.   reporting period.          75       6,158,529        1,374,942

Reports for which no
management decision was
made within 6 months
of issuance.                    13       3,767,169        1,112,833

Inspector General Reports


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         Value

     For which no management decision
     had been made by the commencement
A.   of the reporting period.                      3     4,900,000

     Recommendation that were issued
     during the reporting period.
B.   (These were issued in two reports.)          10     7,325,000*

Subtotal of A+B                                   13    12,225,000

     For which a management decision
     was made during the reporting
C.   period.                                       7      2,300,000

     (i) dollar value of recommendations
     that were agreed to by management             5      1,250,000

     based on proposed management action           5      1,250,000

     based on proposed legislative action          0             0

     (ii) dollar value of recommendations
     that were no agreed to by management          2      1,050,000

     For which no management decision
     had been made by the end of the
D.   reporting period.                             6      9,925,000

Report for which no management decision
was made within 6 months of issuance.              2      4,100,000

* $3.1 million represents recommendations specific to NSF.  $4.2
million represents savings for other federal agencies that we
identified in our capacity as cognizant auditor for all federal

External Audit Reports With
Outstanding Management Decisions

This section identifies audit reports involving NSF awards where
management had not made a final decision on the corrective action
necessary for report resolution within 6 months of the report's
issue date.  The Division of Contracts, Policy, and Oversight is
tasked with making management's decision concerning external audit
reports.  At the end of the reporting period, there were 13 audit
reports with questioned costs that were not resolved.  In addition,
there were three audit reports with only compliance findings that
were open over 6 months.  There were 10 reports over 6 months old
that required final resolution decisions at the end of the last
reporting period.  The status of systemic recommendations that
involve internal NSF management are described on page 68.


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:

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

94-1046        Apeldyn Corporation                09/08/94

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

94-1070        Chemludens                         09/30/94

95-1021        Hone Productions                   03/01/95

95-1022        BBN Laboratories                   03/06/95

95-1023        California BioMarine
               Products                           03/06/95

95-1028        General Atomics                    03/27/95

95-1029        BIOSYM Technologies, Inc.          03/27/95

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

95-1040        Innova Laboratories                03/27/95

95-1041        University of Chicago              03/27/95

95-1042        Mr. Wizard Foundation              03/31/95

Reports with only compliance recommendations:

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

95-5034        Meharry Medical College            02/01/95

95-5052        University of Alabama              02/01/95

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
costs incurred under a non-NSF contract; $86,277 in 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 provided additional documentation, and
negotiations are in-process for resolution.  We expect these issues
to be resolved during the first quarter of FY 1996.

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 in costs that
were ineligible for reimbursement or unsupported.  We also found
that the grantee did not have an adequate financial management
system and failed to notify NSF of equipment purchases.

NSF and the corporation have agreed on the questioned costs.  The
corporation promised to provide NSF with documents to support
unclaimed costs as offsets to the questioned costs.  NSF expects
to resolve this audit by December 31, 1995.

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
communication systems in various education environments.  The
grantee claimed $297,550, and we questioned $17,563.  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 also found that cash advances were obtained in excess of
cash needs and that property records were not maintained.

NSF has not received the data the grantee promised to provide
during the last reporting period.  Therefore, NSF is taking further
steps to resolve this audit.

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.

The financial information the grantee provided was not sufficient
to resolve the report.  We expect final resolution during the first
quarter of FY 1996.

A Commercial Business
Did Not Meet Promised
Cost Sharing

Period First Reported:  October 1, 1994-March 31, 1995

NSF awarded a $347,650 grant to a commercial entity to develop a
video-based exhibit to show timed-phased changes in natural
phenomena.  We questioned $41,600 because the company did not
provide cost sharing in the amount it had promised in the grant
proposal.  We questioned an additional $13,383 because claimed
costs were unreasonable and unsupported and interest income on
grant payments was not submitted to NSF.  In addition, the company
failed to submit a property report to NSF.

The grantee provided additional documentation to NSF.  However,
further communication with the grantee is required.  NSF expects to
resolve this audit during the next reporting period.

A Commercial Enterprise
Has Questioned Costs

Period First Reported:  October 1, 1994-March 31, 1995

NSF awarded a commercial entity 12 science education-related awards
totaling $11,075,662.  We questioned $122,067:  $85,404 because the
company did not meet cost sharing requirements and $31,605 for
indirect costs that exceeded allowable amounts.

The grantee has provided NSF data on final indirect cost rates that
were established with its federal cognizant agency.  In addition,
the grantee is preparing information to compare rates charged to
NSF awards with indirect costs incurred using final indirect costs
rates.  The information will be used to determine any offsets to
questioned costs.  NSF expects to resolve the audit during the next
reporting period.

SBIR Grantee Claims Excessive Costs

Period First Reported:  October 1, 1994-March 31, 1995

NSF awarded an $118,879 grant to a small business to develop a
controlled environment aquaculture system.  We questioned $7,536
because travel costs for family members, alcoholic beverages, and
unsupported costs were charged to the award, and indirect costs
exceeded allowable amounts.  In addition, the company did not
submit financial reports or written accounting procedures to NSF
when they were due.

NSF is reviewing documentation received from the grantee.  After
further discussions with the grantee, NSF expects to resolve this
audit by December 31, 1995.

A Supercomputer Awardee
Claims Unallowable, Unsupported,
and Ineligible Costs

Period First Reported:  October 1, 1994-March 31, 1995

NSF awarded a $60,895,563 cooperative agreement to a for-profit
corporation to manage and operate a Supercomputer Center.  We
questioned $1,826,288 for independent research and development and
capital cost of money charges not allowed in NSF awards; $1,055,634
for unsupported cost overruns; and $51,506 for fringe benefits,
indirect costs, and consultant costs charged in excess of allowed

NSF expects to resolve all issues during the next reporting period.

SBIR Grantee Has
Excessive Indirect Costs

Period First Reported:  October 1, 1994-March 31, 1995

NSF awarded a $250,000 grant to a small business to develop
computer software to be used in building modelproteins.  We
questioned $83,964 because direct costs were not supported and
indirect costs were claimed at amounts that exceeded actual
expenses.  In addition, the company failed to obtain a commitment
for third-party funding, provide required technical reports to NSF
on project results, and deposit advanced federal funds in an
interest-bearing account.

NSF is reviewing information submitted by the grantee, but
additionally, a site visit to the grantee may be required.  NSF
expects to resolve this audit by March 31, 1996.

SBIR Grantee Claims
Excessive Indirect Costs

Period First Reported:  October 1, 1994-March 31, 1995

NSF awarded two grants totaling $463,784 to a small business to
develop an acoustic doppler directional wave spectrum measurement
system and a phased doppler current profiler.  We questioned
$58,437 because the company claimed unsupported costs and its
accounting records and indirect costs exceeded allowable amounts.
An additional $61,380 were costs suspended pending NSF's acceptance
of the company's indirect cost rate data.  In addition, the company
did not obtain a third-party funding commitment.

The company provided documentation to NSF, but it was not adequate.
The company is preparing additional materials to respond to NSF's
questions.  NSF expects to resolve this audit during the next
reporting period.

SBIR Grantee Claims Costs
Not Approved by NSF

Period First Reported:  October 1, 1994-March 31, 1995

NSF awarded a $236,574 grant to a small business to develop
an instrument for electrical surface characterization.  We
questioned $23,771 for direct costs and related indirect costs not
approved by NSF in the award.  The company did not maintain written
consultant agreements or segregated duties in the accounting

Documentation that NSF received from the company is being
coordinated with the NSF SBIR program office before a final
decision is reached.  NSF expects to resolve this audit by
December 31, 1995.

University Has Overdue
Project Reports

Period First Reported:  October 1, 1994-March 31, 1995

NSF awarded an $11,034,885 cooperative agreement to a
university to provide support for a science and technology center
aimed at developing opportunities for students and researchers in
the astrophysical sciences.  We questioned $7,386 because the
university claimed the cost of an employee's dental procedure
and did not have records to support cost sharing requirements.  We
also found the university had overdue final project reports for 24
NSF awards and had deficiencies in its property management.

Since this audit involves issues that affect other federal
agencies, NSF is coordinating with the University's cognizant
agency, the U.S. Department of Health and Human Services, for audit
resolution.  NSF expects to resolve this audit during the next
reporting period.

Financial Issues Involving
Two Principal Investigators

Period First Reported:  October 1, 1994-March 31, 1995

Two PIs continue to have financial problems with supporting
claimed costs similar to those found during a 1990 audit.

In 1992, the PIs, as employees of a nonprofit foundation,
obtained a new $2,711,043 award to produce films describing
exemplary science teaching-methods.  We questioned $157,780
because of duplicate first-class air fares, unallowable group
lunches, and consultant payments that exceeded allowable limits.

We also recommended that NSF restrict to reasonable amounts the
salaries and bonus payments the two PIs may charge to the NSF

NSF has determined that all costs under the NSF award can be
charged as direct payments since this is the only work performed by
the nonprofit foundation.  NSF has prepared communications to the
foundation requesting supporting documentation for questioned
costs.  NSF expects to resolve all issues in the report during the
next reporting period.

Educational Society Reduces
Promised Cost Sharing

Period First Reported:  October 1, 1994-March 31, 1995

NSF awarded a $375,000 grant to an educational society to support
high school chemistry and biology teachers on summer research
projects.  The society had reduced the promised cost sharing amount
for teacher stipends from $600,000 to $450,000 (a 25-percent
reduction) without notifying NSF.  NSF is reviewing the audit and
expects these issues to be resolved during the next reporting

A Medical College Has Not
Met Reporting Requirements

Period First Reported:  October 1, 1994-March 31, 1995

A medical college that received over $1 million in NSF grant funds
did not provide annual progress reports to NSF as required.  Also,
the college had several internal accounting control problems.  NSF
has requested that the college respond to the procedural findings
in the audit report.  NSF expects to resolve this audit during
October 1995.

University Allows Employees
to Charge Retroactive
Salary Increases to Federal Awards

Period First Reported:  October 1, 1994-March 31, 1995

A southern university was found to have allowed an employee to use
retroactive pay raises to adjust time and effort reports and charge
the costs to federal awards based on the availability of funds.
NSF expects to resolve audit issues in October 1995.

Performance Measure

As required by the Inspector General Act of 1978, we provided 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 25, 61, and 62.  The General
Accounting Office, and OMB 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

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

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 generally 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                      39

New Recommendations Made During
Reporting Period                                       20

Total Recommendations to be Addressed                  59

Management Resolution of Recommendations(1)

Recommendations Awaiting Management Resolution          3

Recommendations Resolved by Management                 56

     Management Agrees to Take Reasonable Action       59

     Management Decides No Action is Required           0

Final Action on OIG Recommendation(2)

Final Action Completed                                 22

Recommendations Open at End of Period                  37

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

(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                                      3

     7 through 12 Months                                     0

     more than 12 Months                                     0

Awaiting Final Action After Resolution

     0 through 6 Months                                     11

     7 through 12 Months                                    12

     13 through 18 Months                                    3

     19 through 24 Months                                    0

     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 Months

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.  The
responsible office plans to begin preparing the contingency plan in
November 1995.  Although the delays in implementation are
extensive, no losses have resulted.

2.  In a July 1, 1992, memorandum, we recommended that NSF have an
amendment enacted to bring NSF under the jurisdiction of the
Program Fraud Civil Remedies Act.  NSF prepared an amendment to the
Act and submitted it to Congress on May 11, 1993.  Congress did not
act on the proposed amendment.  The House of 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 again include this amendment in NSF's
legislative program for FY 1996.

3.  In our "Review of NSFNET," dated March 23, 1993, concerning the
management and control of the National Science Foundation Network
(NSFNET), we recommended that NSF ensure that an audit is conducted
of the company that management NSFNET to verify that certain funds
have been distributed appropriately, and disseminate the Acceptable
Use Policy so that all end-users are award of its prohibitions.
The audit is not in progress.  NSF has made the Acceptable Use
Policy available on the Internet, and will soon publish the
Acceptable Use Policy in the Federal Register for public comment.

4.  In Semiannual Report Number 8 (page 33), we recommended that
NSF issue ethics regulations that address concerns specific to NSF
employees.  OGC drafted these regulations and they were recently
cleared by the OGE.  OGC expects to issue these regulations soon.

5.  In Report Number, OIG 93-2102, "Review of National Science
Board Member's Bank Account," March 31, 1993, we recommended that
NSF's Director seek approval from the Comptroller General for
funding the awards dinner from NSF's appropriations account.  NSF
requested an opinion from the Comptroller General.  A response is

6.  In a September 29, 1993, memorandum, we recommended that all
reviewers be more clearly informed, in writing, of all the
requirements of NSF's policy regarding the integrity of the
confidential peer review process.  The goal was to improve the
review of proposals submitted to NSF.  Language to address this
goal has been fully incorporated in revised NSF reviewer forms.
These forms are in the clearance process along with other proposed
changes to the forms.

Prepared by:

Office of Inspector General
National Science Foundation

For additional copies,

Office of Inspector General
4201 Wilson Boulevard
Arlington, VA  22230

For additional information,

Audit                              (703) 306-2001

Investigations                     (703) 306-2001

Oversight (including misconduct
in science and investigations)     (703) 306-2001

Legal                              (703) 306-2100

Electronic Mail Hotline:            oig @ nsf.gov