oversight

Semiannual Report - March 1997

Published by the National Science Foundation, Office of Inspector General on 1997-03-01.

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

         Semiannual Report to the Congress
                                       Number 16
           October 1, 1996 Through March 31, 1997




Office of Inspector General
                     National Science Foundation
Semiannual Report to the Congress

                             Number 16
 October 1, 1996 Through March 31, 1997
                    Letter to the National
                     Science Board and the
                                  Congress

This report describes our activities and accomplishments for the first half of FY 1997.
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.

As described in the following pages, NSF has been working with the President's Office
of Science and Technology Policy to write a definition of misconduct in federally funded
research that can be implemented as the uniform federal definition. Work toward this
objective is ongoing, and we are hopeful of success. We do want to note, however,
that one of the individuals who was integral in the development of NSF’s definition,
policies, and practices in this area will not be available to assist in the government-
wide task.

Dr. Donald E. Buzzelli retired during this reporting period after 22 years of federal
service—all with NSF. Dr. Buzzelli’s deep intellectual understanding of the issues that
bridge science and philosophy made him highly qualified to suggest viable approaches
to the problems that arise in resolving allegations of misconduct. Dr. Buzzelli’s insights
will be missed, but his legacy of excellence provides a benchmark for us as we
continue to work in this area.


Linda G. Sundro
Inspector General
April 30, 1997
                                   Executive Summary
FINANCIAL AUDITS                              INVESTIGATIONS

We completed the first audit of NSF’s         A federal jury found a principal investi-
financial statements. We issued a             gator (PI) at a small business guilty of
qualified opinion on NSF’s Statement of       knowingly and intentionally causing NSF
Financial Position because NSF does not       to wire funds to his company after the PI
have an adequate system to account for        had stopped all research (page 33). A
property and equipment (page 2).              federal grand jury indicted a scientist for
                                              obstructing justice after forging letters of
We reviewed NSF’s cooperative                 recommendation to NSF (page 39).
agreement with a company that registers
Internet domain names and recom-              Instead of recusing themselves, two
mended that federal oversight over            individuals who entered into employment
Internet address allocation continue. We      arrangements with an NSF awardee
estimate that, by the time the agreement      participated in NSF award decisions that
ends, the company must allocate more          involved that awardee (page 38).
than $60 million in fee revenues to a fund
for the “enhancement of the intellectual      MISCONDUCT IN SCIENCE
infrastructure of the Internet.” Instead of
allowing the company to expend these          The National Science Board reviewed
funds, we recommended that NSF                NSF’s experience in handling misconduct
allocate these funds through its merit-       in science matters and reaffirmed NSF’s
based, peer review process (page 10).         preference to maintain the definitions and
                                              processes that have served the agency
At three Federally Funded Research and        well (page 47).
Development Centers, we identified over
$1 million in funds that can be better        We referred two reports with recommen-
used to support research, and we              dations for findings of misconduct in
questioned over $600,000 (page 20).           science and debarment to NSF’s Deputy
                                              Director for adjudication (page 49).
We developed a new performance
measure to track monetary and                 INSPECTIONS
compliance findings that involve cost
sharing (pages 84 and 26).                    We initiated an internal inspections
                                              program designed to help NSF implement
PROGRAM EVALUATIONS                           the Government Performance and
                                              Results Act. In our inspection of NSF’s
At the request of the House
                                              Western Europe Program, we found
Committee on Science, we reviewed
                                              that the Program needs to improve its
NSF policies concerning grantee use of
                                              ability to readily generate accurate
equipment to provide services that may
                                              data to support performance
compete with companies (page 77).
                                              measures (page 68).
             Table Of Contents

1   Audit

32 Investigations

45 Oversight

82 Audit Reports Issued With
   Recommendations for Better Use of Funds
83 Audit Reports Issued With Questioned Costs

84 Additional Performance Measures

88 List of Reports

93 Audit Reports With Outstanding
   Management Decisions
Acronyms
AOR     Authorized Organizational Representative
CAS     Cost Accounting Standards
CFO     Chief Financial Officer
COI     Conflict of Interests
CPA     Certified Public Accounting Firm
CPO     Division of Contracts, Policy and Oversight
EAR     Division of Earth Sciences
FASAB   Federal Accounting Standards Advisory Board
FFRDC   Federally Funded Research and Development Center
FTE     Full-Time Equivalent
GMRA    Government Management Reform Act
GPRA    Government Performance and Results Act
IN-91   Important Notice 91
INT     Division of International Programs
IPA     Intergovernmental Personnel Act
MS&E    Misconduct in Science and Engineering
NASA    National Aeronautics and Space Administration
NSB     National Science Board
OGC     Office of the General Counsel
OMB     Office of Management and Budget
OPS     Office of Policy Support
PI      Principal Investigator
PO      Program Officer
PP&E    Property, Plant, and Equipment
rDNA    Recombinant DNA
REU     Research Experiences for Undergraduates
SBIR    Small Business Innovation Research
SBE     Directorate for Social, Behavioral and Economic Sciences
SRAS    Statement of Recommended Accounting Standards
WEP     Western Europe Program
                       Reporting Requirements
This table cross-references the reporting requirements prescribed by the Inspector General Act of
1978, as amended, to the specific pages in the reports where they are addressed.

 Requirements                                                                         Page

 Section 4(a)(2)     Review of Legislation and Regulations                         Throughout

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

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

 Section 5(a)(3)     Prior Significant Recommendations on Which Corrective           93, 51
                     Action Has Not Been Completed

 Section 5(a)(4)     Matters Referred to Prosecutive Authorities                       32

 Section 5(a)(5)     Summary of Instances Where                                  None to Report
                     Information Was Refused                                      This Period

 Section 5(a)(6)     List of Audit Reports                                             88

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

 Section 5(a)(8)     Statistical Table Showing Number of Reports and Dollar            83
                     Value of Questioned Costs

 Section 5(a)(9)     Statistical Table Showing Number of Reports and Dollar            82
                     Value of Recommendations That Funds Be Put to Better
                     Use

 Section 5(a)(10)    Summary of Each Audit Issued Before This Reporting                93
                     Period for Which No Management Decision Was Made
                     by the End of the Reporting Period

 Section 5(a)(11)    Significant Management Decisions That Were Revised          None to Report
                                                                                  This Period

 Section 5(a)(12)    Significant Management Decisions With Which the             None to Report
                     Inspector General Disagrees                                  This Period
                                                             AUDIT
     The Office of Audit is responsible for auditing grants, contracts, and
   cooperative agreements funded by NSF’s programs. It reviews agency
 operations and ensures that financial, administrative, and program aspects
  of agency operations are examined. It also conducts the annual audit of
  NSF’s financial statements, which encompass approximately $3.2 billion.
  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.




Semiannual Report Number 16             1           NSF Office of Inspector General
AUDIT OF THE FOUNDATION’S
FINANCIAL STATEMENTS
The Government Management Reform Act             funding programs. Each agency’s CFO is
of 1994 (GMRA) amended the Chief                 responsible for developing and main-
Financial Officers (CFO) Act and                 taining adequate financial management
increased NSF’s requirements for the             systems and internal controls as well as
preparation of financial statements, and,        for generating reports on these systems
consequently, the breadth of our internal        that meet audit requirements.
audit responsibilities. Before GMRA was
                                                 Financial statements, and their
enacted, NSF’s CFO was required to
                                                 accompanying audit opinions, can be
prepare, and we were required to audit,
                                                 powerful tools for managers, but a
financial statements for the agency’s
                                                 significant amount of preparation is
$40 million Donations (Trust Fund)
                                                 necessary for their production. GMRA’s
Account. This year, GMRA required the
                                                 timetable for CFO audit implementation
preparation of statements and an audit of
                                                 gave NSF’s financial managers several
accounts comprising NSF’s entire
                                                 years to prepare for the first audit. NSF’s
$3.2 billion budget.
                                                 CFO and his staff used this time to work
The primary purpose of the CFO Act is to         with a large, private-sector certified public
bring more effective general and financial       accounting (CPA) firm to ensure that
management practices to government by            NSF’s financial statements would be
improving its systems of accounting,             complete, accurate, and timely. Because
financial management, and internal               the CFO audit requirement is an annual
controls. The Act imposes corporate              requirement in perpetuity, the time and
models of financial reporting and audit          money expended to restructure financial
assurance so both the Congress and               systems and correct deficiencies
Executive Branch managers can use this           represents an investment that should be
information to make decisions about              recouped in the years to come.
financing, managing, and evaluating



Semiannual Report Number 16                  2              NSF Office of Inspector General
NSF’s Financial Statements                       OIG’s Audit Opinions
NSF’s CFO prepared two principal                 OIG contracted with a major, private-
financial statements for FY 1996                 sector CPA firm to conduct the audit of the
accounts. The Statement of Financial             FY 1996 statements. The 1996 fiscal year
Position reported on the agency’s assets,        closed on September 30, 1996. From
liabilities, and net position (or equity         early in November 1996 through the end
position). The Statement of Operations           of January 1997, we worked with the CFO
and Changes in Net Position is an                and his staff testing account balances and
accounting of NSF’s operations for the           helping to resolve issues as they arose.
fiscal year and provides information about       Final statements were provided to us on
sources of revenue and expenses,                 January 31, 1997, and we forwarded the
describes differences between the                results of our audit to NSF management
revenues and expenses, and accounts for          on February 28, 1997, to meet the
the change in the agency’s net position at       statutory March 1 deadline.
the beginning and end of the fiscal year.
                                                 We audited NSF’s principal financial
The CFO is also required to incorporate          statements so we could express an
financial performance measures into the          opinion on whether the statements, and
statements. Ultimately, the financial            accompanying footnotes, fairly present
performance measures derived from the            the agency’s financial position and results
agency’s financial systems will be               of operations in accordance with
compiled with other administrative and           applicable accounting standards.
mission measures that are being educed
pursuant to the Government Performance
and Results Act (GPRA) to provide
comprehensive measures of NSF’s
performance.




Semiannual Report Number 16                  3              NSF Office of Inspector General
“Opinions” on financial statements are             Auditors are also required to identify and
expressed in one of the following four             report the existence of “material
categories.                                        weaknesses” and “reportable conditions”
                                                   in audited financial systems. A “material
    “Unqualified” or “clean” opinions
                                                   weakness” is an element of the internal
indicate that the auditor has determined
                                                   control structure that does not help reduce
that the statements present the assets,
                                                   to a relatively low level the risk that
liabilities, revenues, expenses, and net
                                                   significant errors or irregularities will go
financial position of the agency fairly, in
                                                   undetected. “Reportable conditions” are
all material respects.
                                                   significant deficiencies in the internal

    “Qualified” opinions indicate that,            control structure that could adversely

except for one or more significant                 affect NSF’s ability to maintain effective

problems, the statements fairly present            internal controls.

the assets, liabilities, revenues, expenses,
                                                   Auditors make the determination of what
and net financial position.
                                                   amounts are “material” to the financial

    “Adverse” opinions signal serious              statements. A judgment on materiality is

problems with the statements and indicate          particularly important in audits where

that the overall financial position has not        large amounts of money are being

been fairly presented.                             accounted for—it is essentially the
                                                   assessment by the auditor of how large an
    A “disclaimer of opinion” states that          accounting error must be to affect his or
the auditor does not express an opinion            her opinion on the statements.
on the statements. A disclaimer is used
when the auditor has not, or cannot,
perform sufficient audit work to form an
opinion on the statements.




Semiannual Report Number 16                    4               NSF Office of Inspector General
Auditors also prepare a separate letter           FY 1996 Audit Results
report to NSF, often referred to as the
                                                  We disclaimed an opinion on NSF’s
“management letter.” This document
                                                  Statement of Operations and Changes in
addresses less significant internal control
                                                  Net Position. Since this was the first year
weaknesses and errors in accounting to
                                                  NSF’s CFO produced this statement, it
provide financial managers with insights
                                                  would not have been cost-effective for the
into how to improve their systems.
                                                  government to invest in a thorough audit

It is the goal of every CFO and Inspector         because of the high level of effort

General to work together so that “clean”          required, and difficulties that would be

opinions on each of the agency’s financial        encountered, to examine properly the

statements can be rendered in the                 cumulative effect of NSF operations

shortest period of time. However, the             during prior, unaudited fiscal years. We

General Accounting Office, the American           plan to audit this statement for FY 1997

Institute of Certified Public Accountants,        using the FY 1996 statements for

and the President’s Council on Integrity          comparison.

and Efficiency have all issued guidance
                                                  Our management letter identified an in-
reminding Inspectors General that they
                                                  ternal control weakness affecting the
must render audit opinions in an
                                                  compilation of this statement. We deter-
atmosphere that enables them to maintain
                                                  mined that NSF’s accounting for cumula-
an independent attitude and appearance.
                                                  tive results of operations and unexpended
                                                  appropriations needs improvement.
                                                  Accordingly, we recommended that NSF
                                                  revise its method of accounting for
                                                  cumulative results of operations from prior
                                                  fiscal years by properly identifying and
                                                  aggregating all sources of revenues and
                                                  expenses. This will allow NSF to support
                                                  an opening balance for cumulative results




Semiannual Report Number 16                   5              NSF Office of Inspector General
of operations in the FY 1997 Statement of        In anticipation of the first-year audit,
Operations and Changes in Net Position.          NSF’s CFO requested and obtained
                                                 certified inventories from the grantees and
We issued a qualified opinion on NSF’s
                                                 contractors that held most of the NSF-
Statement of Financial Position because
                                                 owned assets during FY 1996. Those
we determined that NSF had not main-
                                                 lists were used to adjust the property
tained an adequate system to accurately
                                                 accounts presented as PP&E on NSF’s
and completely account for its capital-
                                                 Statement of Financial Position.
izable property, plant, and equipment
(PP&E). Ninety-nine percent of NSF’s             We attempted to verify the accuracy of the
$922 million PP&E balance is located at          PP&E account balance. Our test results
sites and facilities operated by NSF             raised concerns related to the safe-
grantees and contractors—including               guarding of assets, the recording of PP&E
substantial assets located in New Zealand        transactions, the completeness and ade-
and Antarctica, which are used in the            quacy of the documentation supporting
operation of the U.S. Antarctic Program.         the assets listed on the custodians’
NSF’s financial managers rely primarily on       property listings, and inconsistencies
financial statement audits conducted by          related to the recording of salvaged
the awardees’ independent auditors to            assets. As a result, we could not verify
ensure compliance with the requirement           that the PP&E balance reported in the
for accurate and complete listings of            Statement of Financial Position was
PP&E assets. As a standard practice,             accurate and complete.
NSF receives property lists from its major
                                                 In addition to concerns about PP&E, our
grantees and contractors that have
                                                 audit identified other material weaknesses
custody of NSF-owned assets.
                                                 and reportable conditions in NSF’s
Adjustments are made to NSF’s property
                                                 systems of internal controls. Material
records to bring those records into
                                                 weaknesses were identified in NSF’s
agreement with the property balances
                                                 systems for reporting accrued liabilities
reported by the grantees and contractors.




Semiannual Report Number 16                  6               NSF Office of Inspector General
and making advances to grantees, and               performance measures. Similarly, we
receiving advances from other federal              were unable to evaluate the financial
agencies. These material weaknesses                systems’ capability to capture cost and
were the result of significant omissions           resource data and relate them to program
and overstatements related to advances             activities. We recommended that NSF
and liabilities incurred in the last quarter       develop performance measures that
of the fiscal year that were later adjusted        describe programmatic outcomes and
on the financial statements. We                    develop a system that will properly aggre-
recommended that NSF revise its                    gate underlying cost and resource data.
accounting procedures for year-end
                                                   Our review also identified weaknesses in
advances and liabilities.
                                                   NSF’s ability to identify contingent
Other reportable conditions identified in          liabilities. In particular, lawsuits have
the Independent Auditors’ Report on                been filed against NSF awardees by third
Internal Control Structure related to NSF’s        parties with respect to matters arising
system for developing performance                  from NSF contracts or grant awards.
measures and the system through which              NSF’s Office of the General Counsel
NSF identifies and tracks contingent               (OGC), which is responsible for keeping
liabilities. NSF’s 1996 Annual Financial           management apprised of potential claims,
Report contains a discussion of its major          initially took the position that such claims
programs and related activities as well as         did not have to be considered for financial
descriptions of significant accomplish-            statement purposes because NSF is not a
ments. There are, however, few, if any,            party to the actions and would not be
performance measures that present                  legally obligated to satisfy judgments
financial or program outcomes in terms of          entered against its contractors or
dollars or other quantitative measures.            grantees. We believe federal auditing
We were unable to determine whether                standards require that management report
NSF’s internal control structure was ade-          these claims as contingent liabilities
quate to generate reliable and complete            because awardees may seek




Semiannual Report Number 16                    7               NSF Office of Inspector General
reimbursement for successful claims from             Working Toward Clean Opinions
NSF. This could affect the allocation of             for the FY 1997 Statements
program funds in future fiscal years. In             The single largest impediment we have
line with generally accepted accounting              identified to date to producing uniformly
standards, NSF management agreed to                  “clean” opinions in FY 1997 remains the
report as contingent liabilities the potential       PP&E issue. Under currently existing,
losses arising from claims against NSF               generally accepted accounting standards,
awardees when (1) the likelihood of loss             NSF is required to provide accountability
becomes probable, (2) the amounts of                 and control over these assets. NSF
loss can be reasonably estimated, and                property records are expected to
(3) NSF management determines that the               (1) identify physical quantities of
agency will probably pay them. Based on              government-owned and leased property
the information provided in response to              and its location, (2) capture information on
our request, we also determined that OGC             all acquisitions (including cost, estimated
does not have a formal system for                    life, disposals, and retirements), and
identifying contingent liabilities. We               (3) enable periodic independent
recommended that a formal process for                verifications.
identifying the existence of contingent
                                                     NSF management has suggested that it
liabilities be implemented. This process
                                                     might be appropriate to reclassify all NSF-
should include more effective communi-
                                                     owned PP&E held by grantees and con-
cation between OGC and NSF program
                                                     tractors as “stewardship investments.”
managers about claims occurring in the
                                                     Under currently existing accounting
course of NSF awards.
                                                     standards, stewardship investments en-
Our management letter also recommen-                 compass expenses that have substantial
ded improvements in controls over cash               long-term benefit, but have no commercial
receipts and disbursements; the review               application or market value. The Federal
and approval of accounting entries,                  Accounting Standards Advisory Board’s
records, and documentation; the audit                (FASAB) Statement of Recommended
follow-up process; and electronic data               Accounting Standards (SRAS) No. 8,
processing and physical security.                    entitled “Supplementary Stewardship
Semiannual Report Number 16                      8               NSF Office of Inspector General
Reporting” (effective beginning in FY              PP&E assets from the principal
1998), states that PP&E meeting certain            statements.
stewardship criteria may be reported on a
                                                   NSF’s management has demonstrated a
supplementary stewardship statement and
                                                   sound understanding of, and commitment
treated as an expense in the year of
                                                   to, implementing the CFO Act’s financial
purchase. In this way, PP&E meeting the
                                                   and administrative management
stewardship criteria and treated as an
                                                   principles. However, CFO implementation
expense in the year of purchase would, in
                                                   is not without substantial cost. To date,
subsequent years, no longer be subject to
                                                   NSF management has expended approxi-
audit in the Statement of Financial
                                                   mately $510,000 to hire a private-sector
Position.
                                                   accounting firm to assist in the prepara-
At this time, NSF’s CFO believes that it           tion of financial statements and to advise
may be possible to reclassify all, or nearly       management on issues that arose during
all, of the $922 million in PP&E assets            the FY 1996 audit. Management antici-
currently shown on the principal state-            pates that it will spend an additional
ments and move them to a supplementary             $215,000 on preparation of the FY 1997
statement. However, right now, SRAS                statements and resolution of other out-
No. 8 is only a recommended accounting             standing audit issues. OIG has spent
standard, which will not become effective          about $500,000 in staff resources and
until FY 1998. Further guidance as to its          private-sector accounting firm fees to
applicability to NSF assets held by                audit the FY 1996 statements. Resolution
contractors and grantees is expected from          of the PP&E issue may ultimately neces-
FASAB, the General Accounting Office,              sitate more audit expenditures. In the
and the Office of Management and Bud-              coming months, we will be working closely
get (OMB) in the near future. The CFO,             with NSF management and the National
the Inspector General, and the indepen-            Science Board’s (NSB) Committee on
dent public accountants agree that further         Audit and Oversight to set priorities,
guidance on the implementation of this             identify options, and allocate resources
recommended standard is needed before              for our ongoing implementation of the
it is prudent to remove large amounts of           CFO Act.

Semiannual Report Number 16                    9              NSF Office of Inspector General
FUNDS PUT TO BETTER USE
One of OIG’s fundamental objectives under the Inspector General Act is to help NSF
increase the cost-effectiveness of its expenditures. Specifically, the Inspector General
Act requires that we “provide leadership and coordination and recommend policies for
activities designed to promote economy, efficiency, and effectiveness in the
administration of” NSF’s programs and operations. Such activities will be increasingly
important as budgetary pressures mount.

Fee for Domain Name                                names map to Internet number addresses,
Registration Services Can Be                       which identify each computer interface
a Source of Future Federal
                                                   attached to the Internet and are used in
Investment in Research
                                                   routing information over the network.
We reviewed NSF’s current arrangement
                                                   Domain names are popular with Internet
for providing Internet domain name
                                                   users because they are easier to
registration services through a
                                                   remember than number addresses. Our
cooperative agreement with a commercial
                                                   review focused on
enterprise (“the Company”). For the
Internet to operate, the origin and                • the need for continued federal
destination points for information routed            oversight of Internet addresses and
between computers over the network must
                                                   • the Company’s use of the fee revenues
have unique addresses. The Internet’s
                                                     collected under the cooperative
world wide web addresses, such as
                                                     agreement to create a pool “for the
“www.fastlane.nsf.gov,” are now widely
                                                     preservation and enhancement of the
used by the general public. The part of
                                                     ‘Intellectual Infrastructure’ of the
the address after the last period (“gov” in
                                                     Internet in general conformance with
the above example) is called the “top-level
                                                     approved Program Plans.”
domain name,” and the part of the
address immediately to the left of the last
period (“nsf” in the example) is called the
“second-level domain name.” Domain




Semiannual Report Number 16                   10              NSF Office of Inspector General
    Federal Investment in the Internet.                 Domain Name Registration. In
The government has made major                       January 1993, NSF entered into a 5-year
investments in the creation of the Internet.        cooperative agreement with the Company
In addition to developing operational               to provide registration services. NSF
precursors and subsidizing their use by             amended that agreement in September
the research and education community,               1995 and authorized the Company to
federal funding has supported research              charge fees for its domain name
and development of related technologies.            registration services. Under this current
From FYs 1990 through 1995, NSF                     arrangement, the Company collects fees
support for fundamental research on                 from individuals registering in the top-
communications theory and data networks             level “com,” “net,” and “org” domains and
as well as the provision of network access          from NSF for registrations in the top-level
for the science and education                       “gov” and “edu” domains. The chart on
communities exceeded $230 million.                  page 12 shows the total (solid circles)
                                                    and percentage increase per month
The government will continue to invest in
                                                    (monthly growth rate) (diamonds) in
the Internet. In the fall of 1996, the
                                                    domain name registrations.
President identified the need for a
$500-million investment in the next                 Using conservative methods to estimate
generation of the Internet over the next 5          future growth, we estimate that the
years. The contributions of NSF and the             number of domain name registrations will
other implementing agencies toward this             reach about 4 million by mid-1999.
new initiative could total as much as
                                                    Fees are not charged separately for
$100 million in FY 1998.
                                                    Internet number addresses. Therefore, all
                                                    costs of the services supported by the
                                                    fees fall only upon those registering
                                                    names. Imposing number address fees
                                                    would distribute this burden more equi-
                                                    tably throughout the Internet community.



Semiannual Report Number 16                    11              NSF Office of Inspector General
                                                           Projected Domain Name Registrations


                    4,500,000                                                                                                                                                                      25

                    4,000,000
                                                                                                                                                                                                   20
  Total (circles)




                    3,500,000




                                                                                                                                                                                                        Growth Rate (diamonds)
                    3,000,000
                                                                                                                                                                                                   15
                    2,500,000

                    2,000,000
                                                                                                                                                                                                   10
                    1,500,000

                    1,000,000                                                                                                                                                                      5
                     500,000
                                                                                                                                                                                                                                 Total Registrations
                           0                                                                                                                                                                       0                             Projected Total
                                Jan-95

                                         Apr-95

                                                  Jul-95



                                                                    Jan-96

                                                                             Apr-96

                                                                                      Jul-96



                                                                                                        Jan-97

                                                                                                                 Apr-97

                                                                                                                          Jul-97



                                                                                                                                             Jan-98

                                                                                                                                                      Apr-98

                                                                                                                                                               Jul-98



                                                                                                                                                                                 Jan-99

                                                                                                                                                                                          Apr-99
                                                           Oct-95




                                                                                               Oct-96




                                                                                                                                    Oct-97




                                                                                                                                                                        Oct-98
                                                                                                                                                                                                                                 Growth Rate




Internet users have complained that NSF                                                                                            If, after the period of the cooperative
has given the Company a “monopoly.”                                                                                                agreement ends, the Company does not
The Company is acting pursuant to a                                                                                                operate under NSF direction and is
legally binding agreement with NSF, in a                                                                                           somehow able to continue to provide its
manner that NSF has scrutinized and                                                                                                current registration services and collect
deemed acceptable. The agreement has                                                                                               registration fees, nothing would prevent
not conveyed any authority to the                                                                                                  the Company from using its de facto
Company that extends beyond the                                                                                                    control of Internet addresses to reap
duration of the agreement, which expires                                                                                           unreasonably high profits from granting
on September 30, 1998. The agreement                                                                                               access to the Internet. It has been
limits the Company’s ability to impose                                                                                             proposed that domain names be
registration fees because any changes to                                                                                           registered by several different
the fee structure require NSF approval.                                                                                            organizations in other top-level domains




Semiannual Report Number 16                                                                                               12                                      NSF Office of Inspector General
equivalent to the “com,” “net,” and “org”               Application of Infrastructure
domains presently administered by the               Development Fund. Under the current
Company, in order to ensure that ensuing            cooperative agreement, 30 percent of the
competition for customers among these               revenue generated from domain name
alternative registries will stimulate               registration fees are deposited into a pool
improved services at lower prices. That             for the preservation and enhancement of
proposal contemplates that a single,                the Internet. The Company has sug-
private nonprofit entity will select the            gested that these funds be turned over to
companies to register domain names;                 a private foundation to support Internet
another proposal would allow a nonprofit            improvement projects. In our view, the
entity to allocate number addresses. In             Company’s proposal would entrust these
our view, proposals that rely on one                funds to an entity that would lack any
private entity with the authority to select         relevant experience and that could not be
and confer legitimacy upon domain name              held accountable for ensuring that the
registries or number address distributors           application of the resources will best
do not allay concerns about abuse of                serve the Internet community and the
market power and anti-competitive                   public. We believe that NSF possesses
behavior. In light of the significant public        the requisite understanding of the impor-
interest in the continuing stability of the         tant technical issues and the confidence
Internet and the large federal investments          of the research community to apportion
at stake, we recommended that federal               such funds wisely among its Internet-
oversight of Internet addresses continue.           related research programs through its
Absent continued NSF oversight of                   merit-based, peer-review processes to the
Internet name and number addresses, we              benefit of the nation as a whole as well as
recommended that NSF urge the Federal               the Internet community. Therefore, we
Communications Commission to consider               recommended that NSF receive these
exercising its authority under the                  funds to support NSF program activities.
Communications Act of 1934, as                      We intend to examine the infrastructure
amended, to ensure impartial and                    pool accounts when we audit the
equitable allocation of Internet addresses.


Semiannual Report Number 16                    13              NSF Office of Inspector General
Company’s costs, revenues, and practices                Administrative Options. We recom-
under the cooperative agreement.                    mended that NSF use the income from the

We recommended that NSF continue the                administration of Internet addresses to

cooperative agreement through the                   supplement direct federal appropriations,

September 30, 1998, expiration date.                with the ultimate objective of making

Even assuming that the Company’s actual             NSF’s investment in network-related basic

deposits to the infrastructure pool reflect         research, service, and development self-

only its current apparent collection rate of        sustaining. We estimated that by

50 percent, $60 million would be provided           adopting our recommended approach,

to NSF from the pool over the present               NSF can generate more than $300 million

term of the agreement. Our recommen-                over 5 years to invest in Internet-related

ded approach would ensure the continu-              projects. With this income, NSF could

ation of federal oversight while long-term          fund much of the next generation Internet

policy decisions are made, preservation of          initiative or continued fundamental

NSF audit rights, and appropriate use of            research on communications and data

taxpayer funds.                                     networks.

                                                    We suggested different administrative
                                                    options to achieve this fiscal objective,
            )XQGV WR EH 3XW
             WR %HWWHU 8VH                          including administration through a
                                                    “performance based organization” or an
 Funds the Office of Inspector General
                                                    independent commission. Each of the
        has identified in an audit
                                                    options could accommodate different
  recommendation that could be used
                                                    ways of registering domain names. For
 more efficiently by reducing outlays,
                                                    example, registration services could be
      deobligating funds, avoiding
                                                    performed by several different
 unnecessary expenditures, or taking
                                                    organizations competing for customers;
       other efficiency measures.
                                                    alternatively, a single organization could




Semiannual Report Number 16                    14               NSF Office of Inspector General
be competitively selected to provide the             not be appropriate for NSF to continue its
service at a reasonable profit for a fixed           oversight of Internet address registration,
period. All of these options would,                  and it referred our report for consideration
however, ensure that federal oversight of            by an informal interagency task force
Internet addresses continues and that                chaired by OMB. NSF explained that “[i]n
income generated from the administration             the meantime, next-step solutions . . . are
of Internet addresses would be used to               being implemented,” citing the proposals
supplement the federal investment in                 discussed above that would create new,
network-related basic research, service,             top-level domain name and Internet num-
and development. To ensure that the                  ber address registries. We believe these
Internet address allocation rules and fee            proposals could result in a concentration
structure adopted by NSF are fair, we                of market power and possible anti-
suggested that NSF follow procedures                 competitive behavior. As a result, we are
that facilitate public participation and open        referring these matters to the Antitrust
decisionmaking.                                      Division of the Department of Justice for
                                                     analysis and suggested disposition.
We believe our recommendations would
ensure the protection of the public interest         In its response, NSF also pointed out that
in the resource; the availability of funds to        the Company has proposed a new, non-
support future network-related basic                 profit organization to use the funds “for
research, service, and development;                  the preservation and enhancement of
fairness to the Internet community; and              the ‘Intellectual Infrastructure’ of the
fairness to the taxpayers.                           Internet . . . .” We are aware of the
                                                     Company’s proposal, and we question
NSF’s Response to Our
                                                     whether it is either necessary or efficient
Recommendations
                                                     to create a new, nonprofit organization—
NSF responded to our report by stating
                                                     and the associated administrative
that “long-term issues raised by [our]
                                                     overhead—in order to distribute funds,
recommendations may indeed require
                                                     collected under an NSF cooperative
additional government oversight.”
                                                     agreement, to support the development of
Nonetheless, NSF decided that it would
                                                     Internet infrastructure. NSF’s response

Semiannual Report Number 16                     15               NSF Office of Inspector General
also gave no indication whether these                NSF should ensure that the Company fully
funds—generated under an NSF award—                  meets its obligation to provide funds to
would be distributed by relying on the               the infrastructure pool through
rigorous system of merit review that is the          September 1998.
hallmark of NSF’s research investments.
                                                     Reducing Electricity Costs Would
We believe NSF should instead receive
                                                     Make More Funds Available for
and distribute those funds to support                Science
projects selected by NSF’s well-
                                                     NSF pays for electricity costs at a number
established, merit-based peer review
                                                     of institutions either because NSF pro-
system.
                                                     vides most or all of the institutions’ sup-
NSF added that if, by mutual agreement               port or because of the large electricity
with the Company, NSF believes it would              requirements of certain scientific instru-
be appropriate to end the cooperative                mentation. A number of factors indicate
agreement before its expiration date, it will        that these costs can be reduced either by
do so. We remain especially concerned                taking advantage of recent changes in the
that premature termination of the agree-             electric power industry to obtain lower
ment will allow the Company to reduce                rates or by implementing conservation
greatly the amount of funds it contributes           measures to reduce electricity consump-
to the infrastructure pool. The Company              tion. We conducted a review of the
agreed to contribute substantial monies              potential mechanisms through which NSF
toward the future development of the                 grantees could lower their electricity costs
Internet by funding the pool with 30 per-            and the extent to which such measures
cent of all revenues received from user              could result in cost savings to NSF.
fees. (We estimate that the infrastructure
                                                     We found that NSF grantees may be able
pool would receive $60 million over the
                                                     to obtain lower electricity rates by
lifetime of the agreement.) We do not
believe NSF should prematurely terminate             • contracting for delivery of low-cost
the cooperative agreement, which will, in              electricity in states that will soon
essence, waive the company’s obligation                require retail competition (“retail
to meet that commitment. At a minimum,                 wheeling”),

Semiannual Report Number 16                     16               NSF Office of Inspector General
• obtaining the voluntary cooperation of            lower rates in the hope of retaining the
  the local utility in transmitting less            customer when competition begins. One
  expensive power from another source,              NSF grantee negotiated a 17-percent rate
  or                                                decrease from its local utility.

• negotiating with the local utility for            In addition to seeking the lowest possible
  lower rates.                                      rates, NSF grantees can save on elec-
                                                    tricity costs by introducing or supple-
Recent legislation at both the federal and
                                                    menting energy conservation measures.
state levels is opening the electric power
                                                    Significant energy conservation is a goal
industry to competition, but, at present,
                                                    that most institutions should be able to
the implementation of retail competition
                                                    reach. Three institutions that we reviewed
depends on state law. In certain states
                                                    reported cost savings of 8 to 20 percent
that are about to require retail competition
                                                    from their energy conservation programs.
in the electric power industry, grantees
may be able to contract for delivery of             We reviewed electricity costs at six NSF-
lower-cost electricity. In states that have         supported facilities that have either a line
not implemented retail competition in the           item for electricity in their NSF award
electric industry, NSF grantees may be              budgets or are centers for which NSF
able to obtain less expensive power                 pays all or a large part of the operating
through the voluntary cooperation of the            costs, including electricity. We recom-
local utility in transmitting less expensive        mended that NSF require that these and
power from another source. One                      other institutions for which NSF pays
university saved approximately 18 percent           significant electricity costs evaluate the
of its power costs with this type of                feasibility and cost-effectiveness of elec-
arrangement. Finally, 45 states permit the          tricity rate reduction and/or conservation
negotiation of rates with the local electric        measures and incorporate in the awards a
utility in certain situations. With the             plan to minimize electricity costs.
imminent availability of competitive
                                                    Although it is not possible to determine
suppliers of electricity in many states,
                                                    the precise value of the cost savings that
local utilities may be willing to negotiate

Semiannual Report Number 16                    17               NSF Office of Inspector General
could be achieved by such a requirement,            Choosing the Least Expensive
estimates of savings from rate reductions           Air Fare Will Stretch NSF Travel
                                                    Funds
related to the restructuring of the electric
industry are generally at least 10 percent.         NSF can save more than $300,000 over 5
Further, conservation measures by                   years if its travelers use the least
grantees should also result in cost                 expensive available government airfares
savings of at least 10 percent, which is            when departing from or returning to one of
about half of the reduction federal law             the three airports in the Washington
requires for federal facilities by the year         metropolitan area. The General Services
2000. Although many institutions may be             Administration, which negotiates airfares
able to take advantage of both rate                 for the government, has negotiated with
reductions and conservation measures,               the carrier for airfares that vary for
we assumed that each institution would be           departures from Baltimore-Washington
able to use only one approach. As a                 International Airport, Washington National
result, we conservatively estimate cost             Airport, and Washington-Dulles
savings of 10 percent.                              International Airport. We reviewed NSF
                                                    travel for FY 1996 and found that travelers
Based on this figure, the six institutions
                                                    did not always use the airport with the
covered by our review should save
                                                    least expensive airfare. Even after
$2.2 million over a 5-year period
                                                    offsetting the cost of increased ground
beginning in FY 1999 from implementation
                                                    transportation, these travelers could have
of all reasonable and cost-effective
                                                    realized significant transportation cost
electricity savings measures.
                                                    savings by choosing to travel from the

NSF responded favorably to our                      airport offering the lowest airfare to their

recommendations. To help make grantee               destination.

institutions aware of opportunities to save
on electricity costs, NSF plans to post our
report, with links to other information on
this topic, on NSF’s website.



Semiannual Report Number 16                    18               NSF Office of Inspector General
We identified 10 cities to which travel            We recommended that NSF alert travelers
costs vary by between $100 and $500 per            to the airfare variations and actively
round trip depending upon which                    encourage travel from the airport that
Washington area airport is used. Last              provides the most cost-effective trans-
year, NSF paid for 400 trips between               portation. NSF management agreed to
Washington and these 10 cities without             take steps to alert travelers of the airfare
taking advantage of the least expensive            variations and suggest that authorizing
airfare. NSF could reduce airfare costs by         officials ask to be informed when a
more than $125,000 by encouraging its              traveler’s airfare is $100 or more than the
travelers to purchase the least expensive          lowest fare. However, management
airline tickets. After considering the             indicated that it would not issue a policy
additional ground transportation costs             requiring use of the lowest cost transpor-
associated with more distant airports (that        tation because it does not consider such
often have less expensive fares), we               a policy to be either necessary or
conservatively estimate that NSF travelers         enforceable.
could net at least $60,000 savings per
year or more than $300,000 over 5 years.




Semiannual Report Number 16                   19              NSF Office of Inspector General
OVERSIGHT OF NSF FEDERALLY FUNDED RESEARCH
AND DEVELOPMENT CENTERS
Federally Funded Research and Development Centers (FFRDCs) are organizations
that conduct research and development activities that are administered by an industrial
firm, a university, or a nonprofit institution and are substantially financed by the
government to either meet particular research objectives or provide major research
facilities for which NSF is the primary funding source. NSF is responsible for auditing
five FFRDCs. The magnitude of the annual NSF investment in these organizations,
over $125 million, warrants our continued oversight.
                                                      and final year but may be renewed without
Federally Funded Research and
Development Center Made Errors                        recompetition for an additional 5 years.
in Billing NSF for Research and
Education                                             The FFRDC began work on the database
                                                      in September 1992 to assist its
We reviewed the investments and
                                                      researchers in providing support to the
activities related to a database of federal
                                                      government. Essentially ready for
research and development efforts created
                                                      deployment by December 1995, the
by one of NSF’s FFRDCs. This FFRDC is
                                                      database tracks federal research and
administered and operated by a large
                                                      development investments and activities at
corporation that also administers several
                                                      each federal agency by program and
non-NSF FFRDCs.
                                                      award levels and by fiscal year. Pending
Since the FFRDC began operations in                   resolution of the issues noted below, NSF
September 1992, its mission has been to               modified the contract to allow the FFRDC
provide independent and unbiased                      to make the database available to federal
research and analytical support on issues             agencies for an annual subscription fee.
of relevance to science and technology
                                                      In August 1996, the FFRDC responded to
policy in the United States. NSF is
                                                      NSF’s request for a detailed description of
responsible for financial, management,
                                                      database-related investments and activi-
and audit oversight of the FFRDC’s
                                                      ties. The FFRDC asserted that the
contract. This contract, with an original
                                                      database was not a deliverable on the
budget and subsequent modifications
                                                      contract, and that it used $1.548 million of
representing over $18 million, is in its fifth

Semiannual Report Number 16                      20              NSF Office of Inspector General
its own, rather than federal, funds to            If NSF elects to accept the FFRDC’s
develop the database. Although the                ownership of the database, we recom-
FFRDC initially billed costs associated           mended that the FFRDC reimburse NSF
with database development to the govern-          for the database costs ($641,000) remain-
ment, the FFRDC asserts that this was an          ing on the contract and pay interest on the
error that was subsequently corrected by          federal funds used to develop the data-
transferring those costs from the contract        base. We also recommended that the
to the nonprofit corporation that operates        cognizant audit agency determine whether
the FFRDC. Thus, the FFRDC’s position             database operating losses, if any, should
is that the government did not pay for,           be included in the FFRDC’s overhead
does not own, and cannot assert                   pool.
ownership or control over the database.
                                                  In response to our report, the FFRDC
We conducted an independent review of             suggested a “partnering arrangement”
these issues. The evidence we reviewed            with NSF to ensure that the database
indicated that the database was con-              continues as a viable and useful tool for
sidered a deliverable on the contract; the        federal agencies. This partnering
FFRDC used federal funds to develop the           arrangement would be structured to
database; and the database cost $2.189            address such issues as allocation of
million to develop, which is $641,000             revenues, division of operating costs,
more than the $1.548 million cited by the         assignment of intellectual property rights,
FFRDC.                                            responsibility for control, and treatment of
                                                  user groups, such as the government,
                                                  federal contractors, and federal grantees.
                                                  NSF management is reviewing our report
                                                  and the FFRDC response.




Semiannual Report Number 16                  21              NSF Office of Inspector General
National Research Center Could                     essential to carrying out its mission. By
Increase Funds Available for                       reducing costs and increasing revenue,
Science
                                                   the Observatory could increase funds that
The Observatory is a national research             are available for science. Our recommen-
center for radio astronomy, which is man-          dations for savings and extra revenue will
aged and operated for NSF by a private,            result in $1,172,465 over 5 years. Obser-
nonprofit association of universities. The         vatory management agreed with $324,215
Observatory is headquartered in Virginia           in savings and agreed to undertake
with observation facilities located                studies or reviews of savings totaling
nationwide.                                        $721,945, but disagreed with proposed
                                                   savings of $126,305.
In 1990, the Observatory’s managing
organization entered into a fixed-price              Sick Leave Buy-Back Program. To
contract with a company to build a large           discourage sick leave abuse and enhance
telescope at one of its observing sites.           employee morale, the Observatory reim-
The Observatory expects construction to            burses hourly employees annually for
be complete in 1998. During our review,            unused sick leave. We recommended the
we learned that the contractor building the        program’s elimination, which would save
telescope had submitted claims to the              $194,855 over 5 years. Observatory
Observatory for $28.6 million more than            management agreed to phase out this
the amount of the original fixed-price             program.
contract. The Observatory’s managing
                                                     Cafeteria and Dormitory. The Obser-
organization will use internal staff and a
CPA firm to audit the claim. This audit            vatory subsidizes the cost of food and

began on March 3, 1997, and is expected            lodging services provided to its employ-

to take 3 to 6 months to complete. We              ees and their families, visiting astron-

plan to monitor the situation closely.             omers, and guests. We recommended
                                                   that the Observatory revise its pricing
We also found opportunities for the                policies to reduce the current subsidy.
Observatory to reduce costs or increase            By revising its prices, we estimated that
revenue without eliminating services               the observatory could save as much as

Semiannual Report Number 16                   22              NSF Office of Inspector General
$725,550 over 5 years. Observatory                 The Newsletter. The Observatory
management disagreed with our recom-             publishes an informational newsletter,
mendation to begin charging employees            which it mails free-of-charge to readers.
for meals at one of the remote sites, but        Since the publication is already available
agreed to study its operating procedures         on the Internet, we recommended that the
and expects to reduce the overall                Observatory discontinue the paper
operating loss.                                  version. An Internet-only newsletter
                                                 should save $21,160 over 5 years. The
  Visitor Center. We found that the
                                                 Observatory intends to reduce the number
Observatory’s employee associations
                                                 of paper versions as it gains experience
earned income at the visitor center using
                                                 with electronic distribution.
government resources and property
(project income) and used the income to            Renovation and Replacement
pay for unallowable costs. We                    Reserve. We noted that the building
recommended that project income only be          lease for the Observatory’s headquarters
used for costs that are allowable under          includes a provision that it fund a main-
federal awards. This should save the             tenance reserve of $10,000 per year in
Observatory as much as $122,700 over 5           addition to the building’s maintenance
years. Observatory management agreed             costs. We believe the maintenance
to review visitor center operations.             reserve would be unallowable under
                                                 federal regulations. Under the lease’s
  Recreation Facilities. The Observa-
                                                 current provisions, it is possible that the
tory provides employee recreation facili-
                                                 Observatory could pay $50,000 over the
ties free-of-charge to attract and retain
                                                 next 5 years without receiving any benefit.
qualified employees and their families at
                                                 We recommended that the Observatory
the isolated observing site. We recom-
                                                 negotiate provisions within the lease that
mended that the Observatory begin
                                                 will discontinue payments to the main-
charging a small monthly fee. For exam-
                                                 tenance reserve and instead allow it to
ple, a monthly $10 fee would provide an
                                                 pay only for necessary renovations and
additional $58,200 over 5 years. The Ob-
                                                 repairs. Observatory management
servatory agreed to implement a user fee.

Semiannual Report Number 16                 23               NSF Office of Inspector General
agreed with our recommendation and will            recommendation, agencies have not
make efforts to remove the reserve                 decided to discontinue paying these fees.
provision from the lease.                          Since agencies are continuing to pay
                                                   these fees, we recommended in
Grantee’s Refusal to Comply With
                                                   Semiannual Report Number 15 that NSF
Cost Accounting Standards
Results in Reduced Fees From the                   not allow the Center to charge to the
Government                                         government, through the Center’s indirect

During this reporting period, we followed          cost pools, depreciation for equipment

up on several issues related to an FFRDC           purchased with federal management fees.

administered by a university consortium            We also recommended that NSF require

(the Center) for which we have federal             that the Center account separately for

cognizant oversight responsibility. These          management fees paid by federal

issues included following up on other              agencies and review the uses of these

agencies’ and NSF management’s                     fees. NSF management has not

responses to our prior reports’ recommen-          responded to our recommendations.

dations regarding fees paid to the Center,
                                                       Compliance With Cost Accounting
determining the status of a contract pro-
                                                   Standards. In Semiannual Report
posal the Center submitted to the National
                                                   Number 13 (page 7), we reported on the
Aeronautics and Space Administration
                                                   Center’s need to comply with Cost
(NASA), and reviewing the Center’s
                                                   Accounting Standards (CAS). We
proposal to purchase a new building.
                                                   reported that CAS identifies 19 areas that

    Prior Reports Related to Fees. In              an organization should address in its

Semiannual Report Number 13 (page 7),              accounting system. CAS also requires

we estimated that the government could             that an organization prepare an annual

save $4.5 million over a 5-year period             disclosure statement. The disclosure

(about $900,000 annually) by eliminating           statement describes an organization’s

the fees its agencies pay to the Center. In        accounting practices including, but not

Semiannual Report Number 15 (page 14),             limited to, the distinction between direct

we explained that, despite our                     and indirect costs and the organization’s
                                                   method of allocating costs.
Semiannual Report Number 16                   24              NSF Office of Inspector General
NASA requested that, as the Center’s               included in the cooperative agreement
cognizant federal agency, we review a              requires that the Center obtain NSF ap-
contract proposal it received from the             proval before it purchases any real pro-
Center. In Semiannual Report Number 14             perty. We reviewed the Center’s proposal
(page 14), we reported that the Center             and determined that, although the
requested over $1.3 million in fees as part        Center’s estimates of savings did not
of this contract proposal. In light of our         reflect an analysis based on net present
recommendations, NASA chose not to                 values, the purchase of the building, in
award the contract to the Center because           lieu of continued leasing, would result in
of the Center's refusal to comply with             significantly reduced cost to the
CAS. Instead, NASA awarded the                     government.
contract to a University. The Center
                                                   Under the agreement with the Center,
subsequently submitted a proposal to the
                                                   NSF is committed to pay the full costs of
University for a subcontract, which
                                                   space associated with the Center’s
included $570,000 in management fees
                                                   buildings without regard to the amount of
for the Center. This amount for fees is
                                                   vacant space. However, in the new
$730,000 less than the Center would have
                                                   building, NSF will not be obligated to pay
received from NASA under the original
                                                   for vacant space. Therefore, we
contract proposal. The University expects
                                                   supported the stipulation contained in the
to fund the Center’s proposal.
                                                   letter from NSF approving the purchase
    Proposed Building Purchase. In                 that the Center not create vacant space in
December 1996, the Center notified NSF             its fully supported government buildings
of its intent to purchase a $4.6 million           by relocating staff from these buildings to
building near one of its main facilities.          the newly purchased building.
The Center has been renting space in the
building (approximately 85 percent of the
available square footage). A provision




Semiannual Report Number 16                   25              NSF Office of Inspector General
AUDITS RESULTING IN QUESTIONED COSTS
We select organizations and awards for review based on a preliminary assessment of
whether it appears 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 or programs that have the greatest risk of financial
irregularities and provide opportunities for the greatest dollar recoveries. This section
describes audits of NSF awardees conducted in this reporting period that involve
significant questioned costs.

Institutions Had Significant                       We found two problems with the
Shortfalls in Cost Sharing and Did                 institutions’ management of these awards:
Not Promptly Start Projects
                                                   shortfalls in cost sharing and delays in the
We conducted a review of the Academic              commencement of the projects. Although
Research Infrastructure program, a cross-          institutions agreed to contribute to the
disciplinary program that provides awards          costs of the renovation and acquisition of
to renovate research facilities and pur-           scientific instruments as a condition of the
chase major scientific instrumentation. To         awards, we found that over one-third of
ensure that our review included awards             the institutions were significantly behind in
that were completed or in-progress, we             meeting their cost-sharing commitments.
limited our review to awards made during           At the time of our review, these
FY 1994. We reviewed all 72 of the                 institutions had met only $7.8 million of
facilities’ renovation grants, with budgets        $11 million in cost-sharing commitments.
that totaled $55 million. In addition, we          In addition to this shortfall, these
reviewed 50 instrumentation awards with            institutions will be required to contribute
combined budgets of $10 million.                   another $11.2 million toward their cost-
                                                   sharing commitment as they complete
                                                   these NSF-funded projects. We believe
                                                   that, without NSF oversight, the cost-
                                                   sharing commitments from institutions
                                                   may not be fulfilled by the time the
                                                   projects are completed. We recommen-
                                                   ded that NSF monitor institutions to


Semiannual Report Number 16                   26               NSF Office of Inspector General
ensure that they meet their cost-sharing             Audits at School Systems and
obligations. We also recommended that                Educational Organizations Result
                                                     in $1.4 Million in Questioned
NSF require that any institutions unable to
                                                     Costs
meet their total cost-sharing commitments
                                                     As reported in previous semiannual
adjust their claims against NSF to reflect a
                                                     reports (Semiannual Report Numbers 13
decrease in total project costs and
                                                     and 14 pages 13 and 17, respectively),
maintain their proportional contribution
                                                     our surveys and audits of awardees under
toward the project. NSF agreed to
                                                     the Statewide Systemic Initiative program
monitor the institutions and determine
                                                     disclosed that improvements were needed
whether remedial actions are necessary.
                                                     in subawardee monitoring and
We also found that 14 of the institutions            subawardee cost-sharing contributions.
delayed initiation of the projects by 10 to          Several of the subawardees were school
26 months. Other NSF-funded research                 systems and other educational
institutions that were prepared to begin             organizations. Based on these findings,
projects when these awards were made                 we initiated surveys of selected school
may have been able to make more                      systems and other educational
effective use of the funds. Accordingly,             organizations to determine whether the
we recommended that NSF award grants                 awardee’s accounting system and related
only to institutions that have demonstrated          records required further auditing.
that they can promptly begin projects.
                                                     During this reporting period, we
NSF agreed that, while it is preferable for
                                                     completed audit surveys of five school
institutions to begin projects soon after the
                                                     systems and three other educational
award is made, this is not always
                                                     organizations. These surveys disclosed
possible.
                                                     that the financial systems could
                                                     adequately account for NSF funds.
                                                     Accordingly, for these eight entities, no
                                                     further auditing was required.




Semiannual Report Number 16                     27              NSF Office of Inspector General
We also completed audits of five school              NSF management will resolve the findings
systems and five other educational                   resulting from the audits with the award
organizations. The audits questioned                 recipients during the audit resolution
$552,853 in claimed costs for the five               process.
school systems and $936,706 for the
                                                     Based on these audit results, we believe
five other educational organizations.
                                                     additional audits of school systems and
These questioned costs consisted of                  other educational organizations are
$400,994 in unsupported labor and                    justified, and we are implementing an
related fringe-benefit costs, $219,039 in            appropriate audit program.
unsupported and unauthorized use of
participant support costs, $259,965 in
unsupported consultant costs, and
$226,546 in indirect costs claimed in
excess of allowed amounts. Additional
questioned costs of $383,015 resulted
from charges in excess of actual costs
incurred, unsupported charges for
materials, equipment, travel, and sub-
contracts and for cost-sharing shortfalls.

Several of those institutions at which NSF
awards are still active have fallen behind
in meeting their cost-sharing
commitments. We believe it is likely the
institutions will fall short of meeting these
commitments by $168,179. We have
characterized these potential shortfalls as
“at risk.”




Semiannual Report Number 16                     28              NSF Office of Inspector General
University Falls Short in Meeting                   under the cooperative agreement. We
Its Commitment to Cost Share in                     also repeated a previous recommendation
an Ice Core Custodial Facility
                                                    that the University account for cost
A major University did not fulfill its cost-        sharing in separate accounts that are
sharing commitment on a cooperative                 integrated in the University’s accounting
agreement. The University received a                system.
$1.7 million award under a cooperative
agreement to build and manage a facility
to be used for storing, curating, and
studying ice cores recovered from the
polar regions of the world. The University
was selected for the award following a
competition in which the predecessor
institution, which had satisfactorily
managed and stored the ice core samples
                                                               4XHVWLRQHG &RVW
since 1975, had made a significantly
                                                        A cost resulting from an alleged
lower-cost proposal to continue operating
                                                       violation of law, regulation, or the
the existing facility.
                                                       terms and conditions of the grant,
The cost-sharing commitment was one of                  cooperative agreement, or other
the factors NSF considered in selecting              document governing the expenditure
the University for the award. We reported              of funds. A cost is “questioned”
that the University had not fulfilled its                because it is not supported by
cost-sharing commitment and recom-                   adequate documentation or because
mended that NSF offset payments under                funds have been used for a purpose
future awards to the University by                    that appears to be unnecessary or
$148,398 to recover the shortfall in the                          unreasonable.
University’s cost-sharing commitment




Semiannual Report Number 16                    29              NSF Office of Inspector General
AGENCY ACTION ON PRIOR AUDIT FINDINGS
Award Funds Used to Pay State                      NSF decided not to implement our
Sales Taxes May Be Avoidable                       recommendations that NSF modify the
 In Semiannual Report Number 15                    award general conditions to expressly
(page 2), we reported on our review of             prohibit payments of state sales taxes on
state sales tax payments charged to NSF            purchases funded by NSF awards and
awards. We estimated that, by adopting             that NSF pursue federal and state
our recommended approach, beginning in             legislative remedies to exempt purchases
FY 1997, NSF would be able to allocate             under NSF awards from the imposition of
more than $20 million over 5 years for             state taxes. Although NSF has the legal
science and engineering research and               authority to do so, NSF does not believe it
education.                                         should now deviate from government-wide
                                                   cost principles that recognize the
NSF responded to our recommendations
                                                   allowability of state sales taxes.
during this reporting period. NSF agreed
that the award terms and conditions                Without endorsing or opposing our recom-
should be modified to prohibit the pay-            mendations, NSF informed OMB of these
ment of sales taxes under NSF awards for           recommendations and requested that
those states that have exemptions for the          OMB consider whether federal cost
payment of sales taxes. NSF intends to             principles should be changed to make
implement a specific policy statement on           sales taxes unallowable. OMB replied
this issue and will ensure that information        that its “cost principles circulars have
on existing exemptions is disseminated to          consistently classified state sales and use
the greatest extent practicable. NSF also          taxes as an allowable cost of Federal
agreed to establish guidance applicable to         awards . . . [and that] OMB is not currently
large equipment purchases, which will              considering any changes to its
ensure that program and grant officials            government-wide policies on the
consider whether to avoid sales taxes by           allowability of sales and use taxes.”
having NSF retain title to the equipment.


Semiannual Report Number 16                   30              NSF Office of Inspector General
Savings Planned Through
Electronic Information
Dissemination
In Semiannual Report Number 15
(page 5), we reported on our review of
information dissemination at NSF,
particularly electronic publishing. We
estimated that NSF could reduce the
volume of paper it disseminates by
50 percent by the beginning of FY 2001,
NSF could save over $1.5 million per year
in printing and postage costs. We
recommended that NSF adopt this
objective as an agency-wide goal and
formalize that commitment through the
Government Performance and Results Act
(GPRA) process with specific goals for
each NSF division.

In this reporting period, NSF agreed that
the goal of reducing paper documents by
50 percent within 3 years was achievable.
To meet the goal, NSF will review current
plans for converting to electronic
dissemination. NSF will consider whether
to include it as a GPRA performance goal.




Semiannual Report Number 16                 31   NSF Office of Inspector General
INVESTIGATIONS



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




Semiannual Report Number 16             32           NSF Office of Inspector General
EMBEZZLEMENT OR DIVERSION OF
NSF GRANT FUNDS
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 purposes 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
actions to protect NSF and its grantees.

Small Business Innovation                           research funds to the SBIR program in
Research Cases                                      FYs 1996 and 1997, respectively. Based
NSF’s Small Business Innovation                     on this formula, NSF spent about $40
Research (SBIR) program is designed to              million on SBIR awards in FY 1996 and
stimulate technological innovation in the           expects to spend approximately $50
private sector, strengthen the role of small        million in FY 1997. Eleven other federal
businesses in meeting federal research              agencies also provide funds to SBIR
and development needs, and increase the             companies.
commercial application of the results of
                                                    During the reporting period, a Principal
federally supported research. NSF
                                                    Investigator (PI) was convicted of fraud
provides funds to SBIR companies in two
                                                    involving an NSF SBIR award. In
phases. Phase I awards are for up to
                                                    addition, we referred another SBIR case
$75,000 and are provided to test the
                                                    to the Department of Justice and are
viability of research ideas. Companies
                                                    continuing work on other SBIR matters.
that are successful in the first phase may
compete for Phase II awards. In Phase II,
companies may receive up to $300,000 to
develop their idea for commercial
application. NSF is required by statute to
allocate 2 percent and 2.5 percent of its




Semiannual Report Number 16                    33              NSF Office of Inspector General
Jury Convicts PI in Federal                         to notify NSF of his change in level of
District Court                                      effort, but that he did not do so because
In September 1990, NSF awarded a                    he feared that NSF would suspend and
$250,000 Phase II SBIR grant to the PI’s            terminate the grant.
west coast company to conduct research
                                                    After the PI stopped conducting research,
for the development of a “soft x-ray” laser.
                                                    he obtained the remaining $210,000 in
The PI proposed to conduct the research
                                                    grant funds awarded for the research by
using a highly specialized laser at a
                                                    completing, signing, and submitting to
prominent west coast research facility.
                                                    NSF’s Division of Financial Management
We initiated an investigation after NSF
                                                    several requests for advance payment or
auditors were unable to conduct a routine
                                                    reimbursement for expenses incurred. In
audit of the company’s SBIR Phase II
                                                    each request, the PI certified that “all
grant because the PI would not respond to
                                                    outlays were made in accordance with the
repeated requests to schedule the audit.
                                                    grant conditions.” Based on these
The PI also failed to submit the required
                                                    certifications, NSF wired grant funds to
final report on his research activities.
                                                    the company’s bank account. In addition,
Our investigation found that the PI only            the PI completed and submitted Federal
conducted research for 3 of the 24 months           Cash Transactions Reports to NSF that
required under this award. After the first          certified that “all disbursements have
3 months of research, the PI discontinued           been made for the purposes and
his research efforts and did not notify NSF         conditions of the award” throughout the
that he had stopped conducting research.            grant period. Our investigation
The Grant General Conditions require that           determined that the PI did not use these
the PI notify NSF of such a dramatic                funds to support research under the grant.
change in level of effort. During an                Instead, the PI used the funds for a
investigative interview, the PI stated that         variety of other purposes, including
he intended to complete the research but            personal living expenses, travel and
had been excluded from using the laser at           equipment unrelated to the grant,
the research facility. The PI admitted to           personal investments, and repayment of
our agents that he knew he was required             personal debts.

Semiannual Report Number 16                    34              NSF Office of Inspector General
We referred our findings to the U.S.               briefed their coworkers on the importance
Attorney’s Office for the Northern District        of many NSF procedures, including main-
of California, and, on November 16, 1995,          taining complete records of every grant,
the PI was indicted by a Federal Grand             and processing only those forms that are
Jury. On January 7, 1997, the case was             properly completed by grantees because
brought to trial in the Federal District           properly maintained records and consis-
Court. NSF employees from the Division             tent practices are essential to the govern-
of Financial Management, the Division of           ment’s ability to prove its case in court.
Grants and Agreements, the SBIR office             This case also caused us to examine
of the Engineering Directorate, and our            NSF’s current requirement that certain
office testified as witnesses for the              records be retained for only 3 years.
prosecution.                                       We recommended that NSF change this
                                                   policy to ensure the retention of such
On January 18, 1997, a federal jury found
                                                   records to cover the statute-of-limitations
the PI guilty of three counts of 18 U.S.C.
                                                   periods associated with criminal and civil
§ 1001, False Statements, and three
                                                   enforcement actions. NSF is taking steps
counts of 18 U.S.C. § 1341, Wire Fraud.
                                                   to extend the record retention period.
The jury concluded beyond a reasonable
doubt that, beginning in September 1991,                             TABLE 1:
the PI knowingly and intentionally                         INVESTIGATIVE ACTIVITY
submitted false certifications to NSF,              Active Cases From Previous                  41
                                                    Reporting Period
causing NSF to wire grant funds to the
                                                    New Allegations                             26
company’s bank account after the PI had
ceased working on the grant. Sentencing                     Total Cases                         67
has been scheduled for May 1997. The
                                                    Cases Closed After Preliminary
PI faces a maximum sentence of 30 years                                                          1
                                                    Assessment
imprisonment and a fine of $1.5 million.            Cases Closed After                          29
                                                    Inquiry/Investigation
NSF employees who testified at the trial
                                                            Total Cases Closed                  30
returned with a new appreciation for the
rigors of proving facts in court. They                      Active Cases                        37

Semiannual Report Number 16                   35              NSF Office of Inspector General
Company Submitted False Claims                    SBIR awardee under the NSF SBIR grant.
to Obtain Payment From NSF                        The PI also received and deposited into
In order to achieve the SBIR program’s            his checking account U.S. Treasury
goal of promoting commercial innovation,          checks representing the first two
NSF requires that each SBIR award be              payments for the NSF SBIR Phase I grant
made to a business rather than an                 while he was a full-time employee of the
academic institution and that the PI be           university and before he began working
primarily employed by the business during         on the SBIR award for the SBIR company.
the period of the award.
                                                  By depositing the U.S. Treasury checks
We received an allegation that the final          before he took the leave of absence
report for an NSF SBIR award described            necessary to make the SBIR company
work that had been conducted by a                 eligible for the award and by submitting a
university, rather than by the SBIR               final report that falsely presented his
company. Our investigation found that             university research as work performed
the PI, who was the owner of the                  under and for the SBIR award by the SBIR
company, also had a long-standing                 company, the PI may have violated
employment relationship with a                    federal statutes.
midwestern university. The PI's SBIR
                                                  We referred our findings to the U.S.
Phase I final report described research
                                                  Attorney to determine whether the PI
performed by the university for a non-NSF
                                                  violated 31 U.S.C. § 3729-3733, the civil
federal research project. The final report
                                                  False Claims Act. If he is found liable, the
presented this work—which the PI and his
                                                  government may recover treble damages
university colleagues had performed at
                                                  as well as impose penalties of $10,000 for
the university before NSF made the SBIR
                                                  each false claim.
award and before the PI took a leave of
absence from his university position to
work with the SBIR awardee—as if it were
original research conducted at and by the




Semiannual Report Number 16                  36              NSF Office of Inspector General
Results of Ongoing SBIR Reviews                    In addition, as members of a government-
                                                   wide task force, we routinely meet with
During this reporting period, we continued
                                                   federal agents from other offices and
to support the efforts of the U.S. Attorney
                                                   Assistant U.S. Attorneys to discuss
to resolve two cases involving companies
                                                   investigative issues involving SBIR cases,
that received duplicate SBIR awards,
                                                   and we are currently assisting various
previously reported in Semiannual Report
                                                   agencies with several other ongoing SBIR
Numbers 14 (page 43) and 15 (pages 28
                                                   investigations.
and 29). In one case, we found additional
duplicate awards and referred that                 During our ongoing reviews of SBIR
additional evidence to the appropriate             grants, we identified a 1994 project that
U.S. Attorney.                                     appeared to be funded by NSF and
                                                   another federal agency. We found that
Our office also identified three other
                                                   the company notified NSF that it had
companies that received duplicate SBIR
                                                   received a duplicate award after the NSF
awards from different federal agencies.
                                                   award was made and that the company
As with previous cases of companies
                                                   requested a change in scope for the NSF
receiving duplicate SBIR awards, these
                                                   grant. We found that no action had been
companies were able to receive duplicate
                                                   taken on the company’s request and that
awards for the same projects because
                                                   NSF still listed the grant as active. In
they did not reveal pending proposals in
                                                   1994, the first and second payments
their duplicate proposals sent to other
                                                   totaling $42,244 for NSF’s SBIR grant
federal agencies. Our reviews found that
                                                   were automatically sent to the company
all three companies had submitted
                                                   after the award letter was mailed. After
proposals to NSF and that two companies
                                                   we recommended that NSF initiate
received NSF SBIR awards. However,
                                                   immediate action, NSF terminated the
the duplicate awards that we identified
                                                   $63,367 grant and requested that the
were from other federal agencies, not
                                                   company return the $42,244 that had
NSF. We referred these matters to other
                                                   been paid to the company.
Offices of Inspector General and will work
with those offices to resolve these cases.


Semiannual Report Number 16                   37              NSF Office of Inspector General
OTHER INVESTIGATIVE MATTERS
                                                   occupied the same positions at NSF and
Improper Hiring Practices in NSF
Directorate Lead to Increased                      had the same responsibilities before and
Cost and Conflicts of Interests                    after their positions were converted to the

In early 1996, NSF’s Office of the Director        FFRDC.

instructed an NSF directorate to reduce
                                                   As a result of these staffing arrangements,
the number of individuals then employed
                                                   NSF pays about 71 percent more for the
directly by the directorate (categorized as
                                                   same services by the same individuals
full-time equivalent [FTE] employees) and
                                                   than it had when the individuals were NSF
to reduce the number of employees then
                                                   FTEs or IPAs. Most of the cost increase
assigned from other organizations to the
                                                   results from indirect costs that were not
directorate on a temporary basis (under
                                                   paid when these individuals were NSF
the Intergovernmental Personnel Act
                                                   FTEs or IPAs.
[IPA]) in order to operate within the
directorate’s allocation. To do so, the            The arrangement also led to violations of
directorate arranged to convert two                conflict-of-interests laws and regulations.
temporary positions previously held by             During the 4-month period between
NSF FTEs, and one position held by an              learning of the upcoming conversion and
IPA at NSF, to non-NSF positions funded            its occurrence, the IPA assignee, who
by an FFRDC that receives most of its              serves as a director of an organization,
funding from the directorate. By                   participated personally and substantially
amending a cooperative agreement, the              in matters involving the FFRDC, with
directorate provided the FFRDC with                which he had an arrangement concerning
additional funds to cover the salaries,            prospective employment. Instead of
benefits, and indirect costs for the three         recusing himself, the office director
positions. The FFRDC then entered into             continued to provide recommendations
employment arrangements with the                   and advice on matters in which the
individuals and assigned them back to              FFRDC had a financial interest.
NSF the next day. The individuals


Semiannual Report Number 16                   38              NSF Office of Inspector General
In addition, in 1994, a division within the        Forged Letters of
same NSF directorate entered into an IPA           Recommendation
agreement with the same FFRDC to staff             A scientist submitted forged letters of
an associate program officer position.             recommendation to NSF as part of the
The FFRDC paid the program officer’s               application materials for NSF’s Alan T.
salary and was technically his employer            Waterman Award, a prestigious research
while he was assigned to NSF. However,             grant worth $500,000 over 3 years. Our
the program officer never worked at the            investigation found that the scientist
FFRDC, and had no prospect of returning            produced the nomination form and three
to the FFRDC upon leaving NSF. For this            letters of recommendation, forged the
reason, he did not consider himself to be          names of his former colleagues on these
affiliated with it for conflict purposes.          documents, and then submitted them to
Instead of recusing himself, the program           NSF. We also found that this scientist
officer participated in the review and             submitted a false document in a proposal
approval process for 12 proposals that             for the NSF CAREER Award that claimed
resulted in 8 awards to the FFRDC.                 he would be collaborating with a former
                                                   colleague when, in fact, that former
We referred these matters to the
                                                   colleague had not agreed to any future
Department of Justice, as required by law.
                                                   collaboration. The CAREER program is
The Department determined that NSF
                                                   an NSF-wide activity that encompasses all
should resolve the matters
                                                   areas of research and education in
administratively and declined prosecution.
                                                   science and engineering.
Accordingly, we referred the matter to
NSF’s Office of the Director to take               The scientist attempted to obstruct our
appropriate corrective action.                     investigation. During an investigative
                                                   interview with our agents, the scientist
                                                   admitted to producing the false docu-
                                                   ments, but stated that his colleagues had
                                                   given him authority to write the references
                                                   and sign their names. After the interview,
                                                   the scientist contacted the former
Semiannual Report Number 16                   39              NSF Office of Inspector General
colleagues whose names he forged and               semester, the PI offered the graduate
asked them to state that they had                  student a $1,500 research assistantship
previously given him authority to write the        on the condition that she return $700 of
references and sign their names when, in           the funds to him. The graduate student
fact, they had not done so. We referred            accepted the assistantship and provided a
this matter to the appropriate U.S.                $700 check to the PI because the student
Attorney’s Office, and a federal grand jury        feared retaliation from the PI, who was the
indicted the scientist for violating 18            student’s advisor.
U.S.C. § 1001, False Statements, and 18
                                                   The joint investigation found that the
U.S.C. § 1505, Obstruction of
                                                   source of the kickback came from state
Proceedings Before Departments,
                                                   grant funds and not federal funds. There-
Agencies, and Committees.
                                                   fore, we referred the evidence of the kick-
PI Obtained a Kickback From                        back to state law enforcement officials.
Graduate Student
                                                   We also found that the PI misused NSF
We conducted an investigation with the
                                                   funds by paying graduate students for
Federal Bureau of Investigation
                                                   research not directly related to the NSF-
concerning a PI at a western university.
                                                   funded projects. The PI was able to
The PI’s research was supported by an
                                                   misuse NSF funds by concealing grant
NSF engineering grant and several state
                                                   financial expenditure reports from the co-
grants. We found that the PI promised
                                                   PIs. The university conducted a review of
graduate students financial assistance in
                                                   the PI’s use of grant funds, treatment of
the form of research assistantships and
                                                   graduate students, and other issues, and
often failed to provide the promised
                                                   refused to renew the PI’s appointment as
assistance. For one graduate student, the
                                                   an Associate Professor. In addition, the
PI did not provide research assistantships
                                                   university removed the PI from the NSF
that he promised to the student for two
                                                   grant and voluntarily returned $6,500 to
consecutive academic semesters. This
                                                   the NSF grant. During our investigation,
situation caused the graduate student to
                                                   the PI left the United States and has not
work in the university cafeteria to meet
                                                   returned.
her financial obligations. In the third
Semiannual Report Number 16                   40               NSF Office of Inspector General
Embezzlement of Federal Funds                      Settlement of Civil Complaint to
by University Administrators                       Stop Fraudulent Scholarship
                                                   Program
A joint Department of Defense OIG and
NSF OIG investigation found that 3                 In Semiannual Report Numbers 14 (page

university administrators embezzled over           46) and 15 (page 31), we reported that we

$90,000 by submitting over 600 false               were working with the U.S. Postal

petty cash vouchers through a                      Inspector Service to investigate an

southwestern university’s accounting               individual who had solicited money from

system. The administrators produced                students by falsely claiming that his

fake invoices that were submitted to the           organization, “National Science Program,”

university as support for the petty cash           could award or obtain academic

vouchers. The administrators randomly              scholarships. Despite signing an

charged the false vouchers to different            agreement with the U.S. Postal Service in

research accounts to conceal the amount            1994 to discontinue such activities, the

of cash that the administrators were               individual persisted in this conduct. In

receiving through the false vouchers.              1996, the Federal Trade Commission

About $40,000 was charged to NSF                   joined our investigation and filed a civil

grants and Department of Defense                   complaint against the individual and an

contracts that had been awarded to the             associate based on their ongoing

university. We referred our findings to the        misrepresentations.

appropriate U.S. Attorney’s Office.




Semiannual Report Number 16                   41              NSF Office of Inspector General
During this reporting period, the                 none of the cases showed a pattern of
individuals agreed to a settlement. The           behavior that would signify criminal intent
agreement requires the individuals to pay         to defraud. In all three cases, the PIs
a combined monetary penalty of $19,000            received two sets of overlapping, but not
and to forfeit $4,440 obtained through the        identical, reimbursements. The PIs each
scheme to the government for                      stated that they were unsure if the host
redistribution to the students who had            institution would cover their expenses and
been defrauded. The individuals are also          that they intended to repay the NSF
permanently restrained from engaging in           grants once they received payment from
or assisting others engaged in scholarship        the host organization. Each PI admitted
services businesses unless they first             that he mistakenly forgot to reimburse his
obtain combined performance bonds of              NSF grant after receiving the payments
$350,000.                                         from the host organization. In all three
                                                  cases, the PIs reimbursed their respective
Duplicate Travel Reimbursements
                                                  NSF grant after we initiated our investi-
by PIs
                                                  gation. About $3,000 was reimbursed for
During this reporting period, our office
                                                  these duplicate payments. We referred
conducted a review of travel charges
                                                  these cases to the Department of Justice,
made to several NSF grants. We found
                                                  which declined prosecution.
three unrelated cases involving PIs who
received travel reimbursements from NSF           Agency Agrees to Post Firearm
grants and from another organization for          Warnings
the same travel expenses. In each case,           A federal criminal statute, 18 U.S.C.
the PI submitted a travel voucher against         § 930, generally bars non-law
an NSF grant and did not reveal that he           enforcement personnel from bringing
had also submitted and received a                 firearms or other dangerous weapons
reimbursement for travel expenses from            onto federal premises. The statute
the organization hosting the meeting to           requires that notice of the statutory
which he traveled. Our investigations             prohibition be posted conspicuously at
determined that, although each PI                 each public entrance. Successful
received duplicate travel reimbursements,         prosecution by the Department of Justice
Semiannual Report Number 16                  42              NSF Office of Inspector General
of persons who endanger NSF employees              to, and to facilitate appropriate
by bringing weapons onto NSF premises              enforcement action by, the agency.
may therefore depend, in part, on posting
                                                   We found instances in which certifications
of the required notices. We recommen-
                                                   were signed by someone other than the
ded that NSF post these notices, and the
                                                   person identified on the cover page as the
agency agreed to do so.
                                                   signatory. In some instances, there was
Improper Signatures on Proposal                    no indication that the certification was
Cover Sheets                                       signed by proxy. To assess the frequency
We reviewed the agency’s practice                  of this practice, we reviewed certifications
concerning certification signatures on             of PIs, co-PIs, and AORs on proposal
proposal cover sheets. PIs and co-PIs              cover sheets from a random sample of
certify on cover sheets to the accuracy of         114 proposals. We identified 114 PIs, 78
factual statements. Authorized                     co-PIs, and 114 AORs—306 signatures in
Organizational Representatives (AORs)              all. We found 19 anomalies. These
certify to provisions concerning debt,             included missing signatures, substitute
debarment and suspension, lobbying                 signatures, and instances in which the PI
activities, drug-free workplace, financial         and AOR were the same person.
conflicts of interests, and institutional
                                                   We recommended that NSF take steps to
compliance with award terms and
                                                   ensure that all certifications be signed by
conditions. The cover sheets warn that
                                                   the individual identified as the certifying
willful provision of false information or
                                                   party; that proposals with improper sig-
concealment of a material fact is a viola-
                                                   natures not be processed until authentic,
tion of criminal law (18 U.S.C. § 1001).
                                                   original signatures are received; and that
This warning is intended to alert signa-
                                                   PIs and co-PIs generally not be permitted
tories to their personal responsibility for
                                                   to sign certifications intended for AORs.
the accuracy of the information provided




Semiannual Report Number 16                   43               NSF Office of Inspector General
Our recommendations were made to                  presence of the PI/PD, co-PI/PD, and
NSF's Office of Information and Resource          AOR signatures. Nonconformance would
Management (IRM) and Office of Budget,            result in the rejection of the proposal.
Finance and Award Management (BFA).
                                                  However, IRM plans to make no judgment
IRM agreed that subsequent to the
                                                  about the appropriateness of the
announcement of a policy change, the
                                                  signatures or whether those signatures
Proposal Processing Unit will begin to
                                                  were original. We have not yet received a
review proposal cover sheets for the
                                                  response from BFA to our other
                                                  recommendations.




                                         TABLE 2:
                             INVESTIGATIVE STATISTICS
                   New Referrals                                         9

                   Referrals From Previous Reporting                     7
                   Period

                   Prosecutorial Declinations                            8

                   Indictments (including criminal                       1
                   information)

                   Criminal Convictions/Pleas                            1

                   Civil Settlements                                     1

                   Administrative Actions                                1

                   Investigative Recoveries*                     $96,267

                   *Investigative Recoveries comprise civil penalties and
                   criminal fines and restitutions as well as specific cost
                   savings for the government. In this reporting period,
                   Investigative Recoveries include government-wide
                   recoveries on 10 cases where NSF was the lead
                   investigative agency.




Semiannual Report Number 16                  44              NSF Office of Inspector General
                                            OVERSIGHT

   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 53,500 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.




Semiannual Report Number 16          45          NSF Office of Inspector General
MISCONDUCT IN SCIENCE
AND ENGINEERING
NSF’s Definition of Misconduct in                   NSF’s definition of misconduct in science
Science                                             proscribes acts that constitute
In the interest of safeguarding the federal         “fabrication, falsification, plagiarism, or
government’s vital interest in the integrity        other serious deviation from accepted
of research conducted with government               practices in proposing, carrying out, or
support, the President’s Office of Science          reporting results from activities funded by
and Technology Policy (OSTP) has under-             NSF.” The core of the definition is the
taken an assessment of the advisability of          “serious deviation” clause: to constitute
uniform procedures for handling allegations         misconduct in science, an act must
of “research misconduct” by all federal             seriously deviate from accepted practices
agencies that fund science. OSTP sought             in the scientific community. Even an
the views of the National Science                   alleged act of fabrication, falsification, or
Foundation—and in particular the NSB—
on a proposal that included a uniform
definition of “research misconduct.” It                   16)·6 '(),1,7,21 2)
was recognized by OSTP and NSF that                   0,6&21'8&7 ,1 6&,(1&( $1'
                                                             (1*,1((5,1*
the construct of “research misconduct” on
                                                     Fabrication, falsification, plagiarism,
which the OSTP request was based was
                                                         or other serious deviation from
narrower than NSF’s use of the term
                                                       accepted practices in proposing,
“misconduct in science.” The NSB and
                                                     carrying out, or reporting results from
NSF’s Director reaffirmed the importance
                                                    activities funded by NSF; or retaliation
for the agency of the broader coverage of
                                                       of any kind against a person who
misconduct in science.
                                                        reported or provided information
                                                           about suspected or alleged
                                                     misconduct and who has not acted in
                                                                     bad faith.



Semiannual Report Number 16                    46              NSF Office of Inspector General
plagiarism will not be considered to be              We recently published The
misconduct in science unless, in a                   Constitutionality of the “Other Serious
particular case, the act seriously deviates          Deviation from Accepted Practices”
from the ethical norms of the relevant               Clause in JURIMETRICS, the American Bar
scientific community.                                Association’s Journal of Law, Science
                                                     and Technology (Vol. 37, winter 1997,
The “serious deviation” clause provides a
                                                     pages 149-166). In this article, we point
legal basis for NSF to take action in all
                                                     out that comprehensive conduct
cases of serious breaches of scientific
                                                     standards similar to the serious deviation
ethics pertaining to NSF-funded
                                                     clause are used by many professions and
activities, including cases that cannot be
                                                     have been uniformly upheld by the
categorized as fabrication, falsification, or
                                                     courts. For example, teachers and
plagiarism. Fabrication, falsification, and
                                                     professors—who constitute the majority
plagiarism are merely examples of
                                                     of the recipients of NSF grant funds—are
misconduct; the phrase “serious deviation
                                                     generally subject to comprehensive
from accepted practices” provides a
                                                     community standards of conduct.
coherent context for those and other
                                                     Teachers can be dismissed for “conduct
examples of misconduct in science. The
                                                     unbecoming a teacher . . . or other good
clause relies on the standards of the
                                                     cause,” while professors are subject to
community. As a former chairman of the
                                                     sanction for “failure to maintain standards
NSB, the governing body of NSF, stated:
                                                     of sound scholarship and competent
  The phrase . . . “serious deviation from           teaching, or gross neglect . . . .” When
  accepted practices” is a significant
  concession to the scientific community.
                                                     assessing a professor’s conduct under
  It essentially invites that community to           the latter standard, a federal appellate
  establish a form of “common law”
  governing the behavior of its members              court concluded that the “academic
  in the legitimate use of public funds. It
                                                     community’s shared professional
  would be well for the scientific
  community to accept that invitation and            standards” supplied fair notice of what
  work on this broader issue rather than
  endlessly debating the more limited                conduct was prohibited.
  issue.




Semiannual Report Number 16                     47             NSF Office of Inspector General
In NSF’s definition of misconduct in            At the February 1997 meeting of the
science, the community standard of              NSB, the NSB reviewed the experience of
ethical practices within the scientific         NSF in handling misconduct in science
profession gives content to the serious         matters. Subsequently, the NSB Chairman
deviation clause under specific                 and NSF’s Director stated NSF’s
circumstances. The serious deviation            preference to maintain, with possible
clause, as defined by the scientific            minor modifications, the definitions and
community’s ethical professional                processes that have served the agency
practices, is no less definite than the         well over the past decade. NSF also
community standards imposed by other            expressed willingness to continue
professions and upheld by courts in             discussions in this area in the interests of
numerous cases.                                 a common federal approach.

The proposed uniform definition would
delete the serious deviation clause from
the definition of misconduct in science.
We believe the proponents of this
proposal do not recognize the importance
of—or the firm legal basis for relying
upon—the practices of the scientific
community to establish what constitutes
misconduct in science. We believe this
proposal should be reassessed based on
these considerations.




Semiannual Report Number 16                48              NSF Office of Inspector General
CASES LEADING TO INVESTIGATION REPORTS SENT TO
THE OFFICE OF THE DIRECTOR
Plagiarism, Violation of                             After evaluating the evidence adduced by
Confidential Merit Review, and                       the university as well as evidence we
Obstruction of Agency
                                                     obtained, we sent the subject a draft
Proceedings
                                                     investigation report recommending that
A subject who committed a relatively
                                                     the subject be found to have committed
modest instance of plagiarism then
                                                     misconduct in science. Shortly thereafter,
rendered his situation far more serious by
                                                     the subject presented us with new
endeavoring to obstruct our investigation.
                                                     evidence that he said proved that he had

We received an allegation that the                   written the text at issue before he

subject, a university professor, had                 obtained the source document. If the

published a paper that contained material            evidence were genuine, it would indeed

plagiarized from a source document. We               have proven the subject to be innocent.

referred the allegation to the university for        However, we investigated and determined

investigation. The university’s investi-             that the new evidence provided by the

gation committee unanimously concluded               subject had been faked. The subject

that the subject had knowingly plagiarized           ultimately admitted that the evidence was

from the source document. We found the               fake, but he claimed that an employee

university's conclusion to be amply                  faked it without his knowledge.

supported by a preponderance of the
                                                     Considering all of the evidence, we
evidence.
                                                     concluded that the subject was respon-
                                                     sible for the employee’s preparation of the
                                                     fake evidence and knew that the new
                                                     evidence was fake when he submitted it
                                                     and vouched for its authenticity.




Semiannual Report Number 16                     49              NSF Office of Inspector General
In assessing the subject's state of mind as        Programmer Falsifies Data
well as the appropriate NSF action, we
                                                   During a university misconduct inquiry, a
considered certain prior acts by the
                                                   computer programmer working on an
subject. We determined that the subject’s
                                                   NSF-sponsored project admitted that he
prior acts supported the conclusion that
                                                   had falsified data. Confronted with strong
he knowingly obstructed the investigation
                                                   evidence of his misconduct, he confessed
in our case and underscored the need for
                                                   that he had designed programs he wrote
strong action by NSF. We concluded that
                                                   to alter experimental results and make the
the subject’s pattern of conduct
                                                   results confirm hypotheses that
demonstrated that he lacked the “present
                                                   researchers on the project sought to test.
responsibility” required for those with
whom NSF does business. We                         The programmer skillfully hid his
recommended that the Deputy Director act           misconduct. He wrote and distributed
decisively to protect federal funds by             many error free programs for examination
terminating the subject's current NSF              and use by members of the research
award and debarring him government-                group. At the same time, he falsified data
wide for 3 years. We also recommended              by altering the system software that was
that the Deputy Director work with the             part of the routine functioning of the
university to minimize the effect of these         research group’s computers. It would
actions on the subject's graduate students         have been highly unusual for researchers
and postdoctoral research associates.              on the project to examine the system
The Deputy Director is reviewing our               software for errors. By falsifying the data
recommendations.                                   in this way, the programmer expected to
                                                   prevent the project’s researchers from
                                                   detecting his misconduct.




Semiannual Report Number 16                   50              NSF Office of Inspector General
     When the programmer confessed, he took                    After the programmer’s confession, the
     full and sole responsibility for his actions              university, acting in accordance with its
     and expressed regret about what he had                    misconduct procedures, found that the
     done. He explained that his falsifications                programmer had committed misconduct
     were prompted by a long-standing                          and terminated his employment. The
     psychiatric disorder that had caused him                  university then investigated further to
     to form an irrational commitment to                       verify that the programmer had confessed
     proving one of the research group’s                       to the full extent of his falsifications and
     hypotheses.                                               that he alone was responsible for the
                                                               misconduct. The PIs and their research
     Some researchers had previously raised
                                                               group engaged in a series of replication
     suspicions about numerous, uncharac-
                                                               studies to assess the extent of the
     teristic errors in the programmer’s work.
                                                               programmer’s falsifications. They sought
     Their suspicions led to an earlier
                                                               to determine whether the scientific
     misconduct inquiry that exonerated the
                                                               findings of studies in which the program-
     programmer. During that inquiry, the
                                                               mer participated were correct. The uni-
     programmer lied convincingly to
                                                               versity appointed a faculty member
     investigators and continued to write
                                                               unaffiliated with the project to monitor the
     programs that falsified data.

                                              TABLE 3:
                                       MISCONDUCT CASE ACTIVITY
                                                                                   FY 1996           FY 1997
                                                                                   Last Half         First Half

Active Cases From Prior Period                                                        68                 59
Received During Period                                                                25                 22

Closed Out During Period                                                              34                 23

In-Process at End of Period                                                           59                 58

Cases Forwarded to the Office of the Director During Period                            2                 2

Cases Held in the Office of the Director More Than 6 Months                            0                 2*
* These cases are described in Semiannual Report Number 15, pages 37 through 41.


     Semiannual Report Number 16                          51               NSF Office of Inspector General
group’s efforts. The monitor concluded              the group included in its progress report
that the programmer’s confession was                to NSF and presented at a scientific
generally accurate, though not reliably             conference. The misconduct substantially
precise in its details.                             delayed the progress of the research and
                                                    involved several researchers in months of
From the evidence the university sent us,
                                                    effort to replicate the group’s findings.
we concluded that the programmer acted
willfully and that his carefully planned            We recommended that NSF’s Deputy
deceptions indicated that he knew that he           Director find that the programmer
was doing wrong. As an experienced                  committed misconduct in science and
programmer with a strong interest in the            seek to enter into a voluntary exclusion
substance of the research, he should                agreement with the programmer whereby
have been well aware of how offensive               the programmer excludes himself from
data falsification is to the scientific             employment in federally funded projects
community’s ethical standards.                      for a minimum of 3 years. We recom-
                                                    mended that, for 2 years after this period,
We concluded that this was an unusually
                                                    the programmer agree, before accepting
serious case of misconduct. The
                                                    employment on a federally sponsored
programmer’s actions undermined the
                                                    project, to inform the head of the project
main purpose for which NSF funds
                                                    and the federal official responsible for it of
research—to advance scientific
                                                    NSF’s misconduct finding and the circum-
knowledge. The programmer’s
                                                    stances surrounding it. We believe this
falsifications did not merely alter a few
                                                    information, by alerting the persons
data points or strengthen the case for a
                                                    responsible for federal projects to the
hypothesis that was already well
                                                    risks involved in employing the program-
supported with genuine data. His
                                                    mer, would enable them to protect the
falsifications were designed to confirm a
                                                    federal interest in preventing misconduct.
previously untested scientific hypothesis.
They prompted the research group to
draw significant scientific conclusions that



Semiannual Report Number 16                    52               NSF Office of Inspector General
CASES CLOSED IN THIS PERIOD WITH NO INVESTIGATION
REPORT TO THE OFFICE OF THE DIRECTOR
In this section, we discuss seven closed cases that did not result in recommendations
for action by the Office of Director, but that nevertheless highlight important issues.
The first four case descriptions present our resolution of allegations resulting from
problematic collaborative relationships between colleagues or between mentors and
students. The last three descriptions present our inquiries into cases that raised
concerns about NSF's management of particular proposals or awards.
                                                   in a foreign country, it was practically
University Thoughtfully Handles
Alleged Obstruction of Research                    impossible for the complainant’s project to
                                                   obtain suitable substitute equipment in a
A PI (the complainant) complained to NSF
                                                   timely fashion.
that a former collaborator (the subject)
had “overtly and deliberately” attempted to        We referred this allegation to the subject’s
obstruct the PI’s NSF-supported research.          university and identified for it those
                                                   questions that we knew an investigation
The complainant related two incidents of
                                                   would have to answer to be satisfactory
alleged obstruction, but our inquiry
                                                   for purposes of NSF action. The
determined that only one of the incidents
                                                   committee weighed contradictory
had sufficient substance to warrant an
                                                   evidence and found that the subject had
investigation.
                                                   permitted the complainant access to
In this incident, the subject allegedly            easily reparable equipment and had made
promised the complainant access to a               him aware of how this equipment could be
piece of equipment that was necessary for          repaired. It further found that the subject
his research; encouraged him, in light of          had reason to fear that researchers on the
this promise, to use his equipment funds           complainant’s project might be careless
for other project-related expenses; and            about the needs of the subject’s project
then unreasonably denied him access to             and might misuse the subject’s
the promised equipment. Because the                equipment. The committee decided that
projects directed by the subject and the           the subject’s primary responsibilities were
complainant shared facilities and                  to fulfill her research plan and ensure the
equipment at a remote field research site          safety of her employees and equipment.

Semiannual Report Number 16                   53              NSF Office of Inspector General
It concluded that, in a difficult situation,        No Plagiarism by Ex-Collaborator
the subject had prudently balanced these
                                                    The complainant notified us of allegations
responsibilities with her responsibility to
                                                    against a scientist who was also a former
cooperate with another scientist. The
                                                    collaborator (the subject). The com-
university concluded that the subject had
                                                    plainant alleged that the subject had
not committed misconduct, and we
                                                    denied coworkers of authorship credit and
accepted its conclusion.
                                                    submitted proposals to NSF and the

In this case, the investigating committee           National Institutes of Health that con-

applied the scientific community’s ethical          tained misrepresentations and plagiarism

standards governing responsibilities to             (including intellectual theft). The com-

colleagues in a thoughtful way to an                plainant also alleged that the university

unusual situation. It conducted its                 administrators retaliated against him

investigation in light of our guidance              because he made his charges against the

about the issues that an investigation of           subject public.

this case would need to address to be
                                                    After discontinuing her collaboration with
adequate for NSF purposes. The
                                                    the complainant, the subject submitted
committee’s report is evidence that the
                                                    proposals without naming him as a co-PI.
partnership between NSF and awardee
                                                    The complainant alleged that the subject’s
institutions can make self-regulation by
                                                    actions contributed to the university's
representatives of the scientific
                                                    subsequent decision to deny him tenure.
community work well.
                                                    A university committee convened to
                                                    examine his tenure review and his
                                                    allegations against the subject. It found
                                                    no evidence to support his allegations that
                                                    he was unfairly denied tenure or that the
                                                    subject had committed misconduct in
                                                    science.




Semiannual Report Number 16                    54              NSF Office of Inspector General
The basis for the complainant’s                      Citations for Unpublished
allegations of misrepresentation,                    Information
falsification, and plagiarism was that data          An NSF program director received an
and methodology developed through the                unusual proposal review from the
subject’s and complainant’s collaborative            complainant and, concerned about some
effort were jointly owned and could not              of the comments in it, brought it to us.
subsequently be used independently by                The review alleged that the PI of the
individual members of the collaborative              proposal inappropriately used the
team. As discussed in Semiannual                     unpublished results and methodologies of
Report Number 10 (pages 27 through 30),              another researcher. The proposal
we recognize that the results of                     contained a number of citations
collaborative projects can, with the                 referencing “personal communications”
appropriate citation, be used                        with the researcher.
subsequently by all collaborators, either
                                                     The researcher told us that the PI had
together or individually. In this case, after
                                                     contacted him and expressed interest in
the complainant’s and subject’s
                                                     his research. The PI allegedly informed
collaborative relationship ceased, the
                                                     the researcher that he was interested in a
subject continued to use their joint data
                                                     research area different from the
and appropriately referenced the source
                                                     researcher’s and that the researcher's
documents. We concluded that the
                                                     techniques and material could be useful in
subject’s actions were not deviations from
                                                     the PI’s research. The researcher gave
accepted practice and would not be
                                                     the PI his material, unpublished
considered misconduct in science.
                                                     manuscripts, and his graduate student's
                                                     thesis chapter. The researcher did not
                                                     stipulate conditions on the use of this
                                                     information.




Semiannual Report Number 16                     55              NSF Office of Inspector General
The PI said that before he submitted his            A Poorly Functioning Faculty-
proposal to NSF, the researcher told him            Graduate Student Collaboration
that the manuscripts and thesis chapter             We received allegations of misconduct in
had not been published. According to the            science against a faculty member at a
PI, they agreed that the best way to cite           western university. Allegedly, the faculty
the information was as “personal                    member misrepresented the research
communications.”                                    effort of his former graduate student when
                                                    he listed himself as first author and the
We concluded that, because the
                                                    student as second author on a publication
researcher gave the PI research material,
                                                    that was an edited version of the student’s
unpublished manuscripts, and a chapter
                                                    master’s thesis. The student was
from a graduate student’s thesis without
                                                    unaware of the publication until after it
conditions on their use, and the PI
                                                    was published, and the thesis was not
carefully referenced the information he
                                                    cited.
obtained from the researcher in his
proposal, his actions did not constitute a          The student said that the faculty member
serious deviation from accepted practice            was never satisfied with the thesis drafts
and would not be characterized as                   he prepared. The student eventually
misconduct in science. We note that if              furnished the faculty member with a
researchers concerned about the future              finished thesis copy and left the institution
use of sensitive information are asked to           without providing a forwarding address.
share material and unpublished results by           The faculty member explained that,
a potential collaborator, they should               although the publication contained text
provide a letter indicating what conditions,        copied from the student’s thesis, it also
if any, apply to the use of unpublished             contained some of his own work. He did
information and research material.                  not cite the thesis because he did not
                                                    view theses as valid scientific
                                                    publications; they were not readily
                                                    available to other scientists and they did
                                                    not go through the accepted scientific
                                                    review process. He explained that he
Semiannual Report Number 16                    56              NSF Office of Inspector General
planned the research project, “wrote” most          Effective communication in a student-
of the thesis, submitted the paper for              faculty mentoring relationship is important
publication, and did not have any way to            for success. In this case, both the student
contact the student during the                      and the faculty member failed to maintain
publication’s preparation.                          effective communication, which resulted in
                                                    troublesome misunderstandings between
We sought the advice of an expert in the
                                                    them.
subject’s field of science who concluded
that “once stripped of the ill will of the          Alleged Misrepresentations in a
student and the arrogance of the advisor,”          Progress Report
the matter was not serious. We deter-               We received a letter alleging that two
mined that the student had a responsibility         administrators acted in bad faith when
to maintain professional contact with the           they accepted an NSF continuing grant
faculty member. At the same time, the               that included the use of laboratory facili-
faculty member had the responsibility to            ties that they knew would be unavailable
notify each named author about a                    to the PIs and that the administrators
manuscript to be published and to afford            coerced the project’s PIs into submitting
each of the coauthors, even a student, the          an NSF progress report that hid this fact.
opportunity to participate in the production        We received the allegation after the first
of the manuscript, including deciding               year's progress report had been submitted
whether documents, such as theses,                  to NSF.
should be cited. We concluded that the
                                                    Although the PIs’ proposal plans included
faculty member deviated from accepted
                                                    the use of laboratory equipment, they also
practice by failing to cite the student's
                                                    knew that there would be times when the
thesis, but that his action was not a
                                                    equipment would (temporarily) not be
serious deviation and therefore it did not
                                                    available to undergraduate students and
rise to the level of misconduct in science.
                                                    made allowances for these instances.
We suggested that the faculty member
                                                    During the first year, the administrators
consider submitting an appropriate
                                                    informed the faculty that the laboratory
citation correction to the journal editor.
                                                    equipment used to acquire data would be

Semiannual Report Number 16                    57              NSF Office of Inspector General
unavailable to undergraduate students.                  manager concluded that the loss of the
In the first year’s progress report, the PIs            laboratory facilities was not detrimental to
wrote that, although it was no longer                   the completion of the project and
possible to use the laboratory facilities at            continued to fund the project.
the university, this was not a problem
                                                        Because the PIs wrote in their progress
because most of the students’ critical
                                                        report that the laboratory was no longer
thinking would involve the analysis, not
                                                        available to them, we concluded that there
the acquisition, of data. The PIs’ report
                                                        was no substance to the allegation that
disclosed that they carefully considered
                                                        they hid this information from NSF. We
their options and concluded that the
                                                        did not determine whether the PIs had
original intent of the proposal could still be
                                                        been pressured by their administrators,
completed. Thus, NSF’s program
                                                        but concluded that the PIs, dealing with
manager was made fully aware that they
                                                        whatever pressure their administrators
no longer had access to the facilities,
                                                        may have put on them, upheld their
including the original equipment, and how
                                                        partnership with NSF by providing an
that would influence their NSF-funded
                                                        accurate progress report.
educational activities. The program




                                 TABLE 4:
                  ASSURANCES AND CERTIFICATIONS RECEIVED*
Number of Cases Requiring Assurances at End of Period                                      5
Number of Cases Requiring Certifications at End of Period                                 7

Assurances Received During this Period                                                     1

Certifications Received During this Period                                                3
* NSF accompanies some findings of misconduct in science with a certification and/or assurance
requirement. For a specified period, the subject must confidentially submit to the Assistant Inspector General
for Oversight a personal certification and/or 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 OIG and are not known to, or available to, NSF program officials.




Semiannual Report Number 16                        58               NSF Office of Inspector General
Program Officer Creates                             We learned that the program officer (PO)
Appearance of Impropriety                           did not divulge confidential information or
Two scientists (the complainants) who               improperly suggest that one scientist
had submitted unrelated declined pro-               misappropriate another’s ideas. However,
posals to the same NSF program com-                 we concluded that the program officer
plained to an NSF division director that            used poor judgment in two instances. In
one of his program officers had improperly          each instance, the PO made remarks that
handled their proposals. The complain-              could be, and were, taken by members of
ants were concerned that the program                the PO’s research community to mean
officer may have divulged confidential              that the PO was suggesting that one
information about their proposed work and           scientist perform work for which another
improperly suggested to scientists at other         scientist was already seeking NSF sup-
institutions that those institutions perform        port. To make such a suggestion would
the work the complainants had proposed              have been a serious breach of the con-
to NSF. In addition, the complainants               fidentiality with which NSF promises to
alleged that the division had an                    review proposals and a misappropriation
unarticulated policy that precluded                 of the ideas in a confidentially submitted
funding proposals such as theirs and that           proposal.
their proposals had not received a fair
                                                    Although we are convinced that the PO’s
review. The complainants chose not to
                                                    actions were well motivated, we believe
ask NSF to reconsider their proposals.
                                                    the PO was insufficiently attuned in these
                                                    instances to the detrimental appearances
                                                    that well-meaning actions can create. We
                                                    recommended that the division director
                                                    send the PO a confidential written
                                                    message expressing disapproval of the
                                                    PO’s actions, and the division director
                                                    accepted our recommendation.




Semiannual Report Number 16                    59               NSF Office of Inspector General
This case presented a mixture of possible          Possible Reviewer Conflict of
serious ethical improprieties and alleged          Interests
poor program management by a program               It came to our attention that an ad hoc
officer. We addressed the possible                 reviewer submitted a proposal to NSF
improprieties in our inquiry. At the same          shortly before he received two proposals
time, insofar as this complaint revealed           from NSF with requests for his reviews.
deficiencies in how well the division arti-        The reviewer's proposal disclosed that the
culated and implemented its policies, we           PIs on both proposals were his research
treated these as matters best resolved by          collaborators; the PIs’ proposals each
the division director and other responsible        contained a citation to a paper coauthored
managers in his directorate. This case             with the reviewer. NSF's Proposal
illustrates some pitfalls that well inten-         Evaluation Form (NSF Form 1) instructs
tioned program officers can encounter              reviewers to disclose any affiliation that
and the need for them to be aware of the           might be considered a conflict of interests.
appearance that their actions can create.          In the absence of such disclosure, NSF
                                                   assumes that the reviewer has no
                                                   conflicting affiliations. NSF considers
                                                   collaborative relationships existing within
                                                   48 months preceding a requested review
                                                   to be potentially biasing. Program officers
                                                   told us that they have disqualified
                                                   reviewers because of existing or past
                                                   collaborative relationships. The reviewer
                                                   did not contact NSF to discuss any
                                                   possible conflict of interests that he might
                                                   have with the two PIs after he received
                                                   their proposals for review.




Semiannual Report Number 16                   60              NSF Office of Inspector General
The reviewer told us that he knew both              It is doubtful that NSF would have
PIs, but he had no current collaborative            considered the relationship described by
relationship with them. He characterized            the reviewer as disqualifying or limiting,
his prior collaboration with them as                and knowledge of it did not influence the
“limited” and said he had disclosed it in           program’s funding decisions. However,
his proposal because, even though the               for the merit review process to work as
research for the paper was conducted in             fairly and objectively as possible, it is
1990-1991, the paper was finally                    NSF, not the reviewer, that must
published in 1992 (less than 48 months              determine whether a reviewer's
before he submitted his proposal). He               collaborative relationships disqualify or
said that he did not disclose his past              limit any review activities. We told the
collaborative relationship with the PIs to          reviewer that he should have disclosed
the NSF program officer along with his              this relationship to NSF before he
review because he did not feel his past             submitted his reviews or, at the latest,
affiliation created a conflict of interests,        along with the reviews, and instructed him
and he felt he could be objective in his            to disclose relevant collaborative
review.                                             relationships in the future.




Semiannual Report Number 16                    61               NSF Office of Inspector General
INSPECTIONS
Our office conducts external and internal inspections. External inspections are on-site
reviews at organizations that receive NSF funding. Internal inspections review NSF's
administrative units.

Inspections are designed to highlight what works well and identify problems or
deficiencies so that managers at NSF and NSF-funded organizations can improve their
operations and better achieve research and education goals. Inspections are conduc-
ted by multidisciplinary review teams that may include scientists, engineers, auditors,
computer specialists, investigators, lawyers, and management/program analysts.

  EXTERNAL INSPECTIONS                           INSPECTION AT A MUSEUM
We designed our external inspections             IN THE NORTHEAST
program to improve our understanding of
NSF’s grantee activities by integrating          This inspection was conducted at a
financial, administrative, and program           museum that has many exhibits as well
analyses in a single review. We view
external inspections as an effective             as programs in basic research and
approach because they allow us to deter-         informal science education. We
mine whether NSF’s program goals are
being achieved as well as review the             reviewed eight NSF grants. NSF’s
financial and administrative management          Directorate for Geosciences awarded
of NSF awards. Inspection teams look for
early indications of financial,                  three grants for basic research and one
administrative, or compliance problems so        grant for equipment. NSF’s Directorate
they can be addressed before they
become so serious that their resolution          for Biological Sciences awarded one
requires an audit or investigation.              grant for basic research and one grant for
During this reporting period, we con-            Research Experiences for Under-
ducted an external inspection at a large
                                                 graduates (REU). NSF’s Directorate for
natural history museum in the northeast.
                                                 Education and Human Resources
                                                 awarded one grant for public education
                                                 about biodiversity, and NSF’s Office of
                                                 Science and Technology Infrastructure
                                                 awarded one grant for the renovation of
                                                 research laboratories.




Semiannual Report Number 16                 62             NSF Office of Inspector General
Financial Controls                                    Indirect Costs. The museum did not
                                                  allocate all of its library’s costs to the
The museum generally complied with
                                                  government in an equitable manner. The
NSF’s and other federal requirements.
                                                  museum allocated nearly 100 percent of
NSF is the museum’s cognizant federal
                                                  certain library costs to its research activi-
agency and therefore is responsible for
                                                  ties instead of allocating these costs in
representing the government as a whole
                                                  accordance with its most recent library
in such matters as establishing indirect
                                                  usage study. From its usage study, the
cost rates and reviewing the adequacy of
                                                  museum determined that 65 percent of
financial systems. We made recom-
                                                  the library’s users were researchers and
mendations to increase compliance and
                                                  35 percent were public users. Increasing
strengthen internal controls in time and
                                                  the allocation of library costs to research
effort reporting and indirect costs.
                                                  activities results in the museum
    Time and Effort Reporting. The                recovering more of its library costs from
museum overcharged an award because               the government through indirect cost
it did not always adjust salary charges to        charges to awards. OMB Circular A-122
reflect the work performed by its                 states that “a cost is allocable to a parti-
employees. OMB Circular A-122, Cost               cular cost objective . . . in accordance
Principles for Non-Profit Organizations,          with the relative benefits received.”
states that employees’ time and effort            Therefore, we recommended that, in its
reports must reflect the employees’ actual        next indirect cost proposal, the museum
work. Accordingly, we recommended that            allocate its library costs according to its
the museum ensure that the amount of              most recent usage study. We also
salaries it charges to awards coincides           recommended that NSF’s Division of
with the actual time its employees have           Contracts, Policy, and Oversight (CPO)
worked on the awards. The museum                  thoroughly review the museum’s next
agreed with our recommendation and has            proposal to ensure that its indirect cost
taken corrective action.                          allocations are equitable so that CPO can
                                                  negotiate and approve the most accurate
                                                  indirect cost rate. NSF’s CPO stated that


Semiannual Report Number 16                  63              NSF Office of Inspector General
it will reevaluate the museum’s indirect             Misconduct in Science
cost rate methodology. The museum
                                                     We were concerned about the museum’s
also stated that it would be receptive to
                                                     policy for handling allegations of
refinements in its allocation methods.
                                                     misconduct in science because of several
In addition, the museum included                     deficiencies. We recommended that the
unallowable depreciation and lobbying                museum specify in its policy the purpose
costs in the calculation of its indirect cost        of an inquiry and how it is distinguished
rate. We recommended that the museum                 from an investigation. We also
review its indirect costs and ensure that it         recommended that the museum's policy
has properly excluded such costs. The                specify that NSF be notified if an
museum agreed with our recommen-                     allegation of misconduct in science is
dation and has reviewed its indirect costs           determined to be substantive and to
to exclude unallowable costs.                        require investigation.

The museum also noted that all of the                Finally, we noted that the museum, which
indirect costs to which we took exception            is not a degree-granting institution, had
would have been totally offset by two                formal affiliations with universities that
museum misclassifications. However, the              enabled its scientists to teach courses
“offsets” to which the museum refers do              and advise graduate students for
not share a one-to-one relationship with             academic credit at the museum. The lack
the costs to which we took exception.                of student coverage under the policy
The museum’s misclassifications would                created a unique situation for the
reduce the costs in question by less than            museum (see essay on page 78). The
7 percent.                                           formal arrangements with universities for
                                                     students who studied at the museum
                                                     included the acceptance and enrollment
                                                     as well as shared financial support for
                                                     participating students by both the
                                                     museum and the university involved.
                                                     Consequently, the assumption would be


Semiannual Report Number 16                     64              NSF Office of Inspector General
that a student alleged to have committed           PI Financial Disclosure Policy
misconduct in science at the museum
                                                   The museum was not in compliance with
would be covered by the affiliated
                                                   NSF’s Investigator Financial Disclosure
university’s misconduct policies. This
                                                   Policy. The museum’s conflict-of-
created uncertainty over what procedures
                                                   interests policy did not become effective
would be used for a student who is
                                                   until November 13, 1996, and disclosures
alleged to have committed misconduct in
                                                   had not been made by PIs on 13
science at the museum and raised
                                                   proposals submitted to NSF since
concerns about confidentiality and
                                                   October 1, 1995, the effective date of
fairness for the subject of an allegation.
                                                   NSF’s Policy. Two of those proposals
All the PIs we interviewed were familiar
                                                   were funded.
with the museum’s policy regarding
allegations of misconduct in science               We informed NSF officials in CPO about
involving museum scientists, but we                this finding. NSF suspended the two
found that there was little consistency            awards whose proposals were submitted
regarding PIs’ responses about what to             after October 1, 1995, until NSF received
do if they became aware of alleged                 updated proposal cover sheets, endorsed
misconduct in science against a student.           by the appropriate institutional official,
Therefore, we recommended that the                 certifying, among other things, that all
museum revise its policy to include                financial disclosures have been made
students.                                          and that the museum will satisfactorily
                                                   address all identified conflicts of interests
The museum agreed with all our
                                                   before it expends NSF funds under any
recommendations and also indicated that
                                                   resulting awards. NSF also requested
it plans to share its revised misconduct in
                                                   that the museum properly endorse cover
science policy with its affiliated
                                                   sheets for the pending proposals
universities and to encourage discussion
                                                   submitted after October 1, 1995, and
about how the universities’ policies relate
                                                   return them to NSF within a specified
to the museum’s.
                                                   deadline. NSF officials informed us that
                                                   the museum submitted all of the


Semiannual Report Number 16                   65              NSF Office of Inspector General
necessary cover sheets, and that NSF                  NSF’s Division of Earth Sciences
                                                      “Hold-Over” Practice
lifted the suspensions on both of the
awards in question. The museum stated                 We learned that NSF’s Division of Earth
in its written response that it had a long-           Sciences (EAR) permits program
standing, conflict-of-interests policy that it        directors to “hold over” some
believes to be more stringent than NSF’s              unsuccessful proposals for review in
Investigator Financial Disclosure Policy.             EAR’s next proposal competition. “Hold
This policy was not mentioned before, or              over” proposals receive no additional ad
during, our on-site review. At the exit               hoc reviews and are declined if they do
briefing, we informed museum officials                not compete successfully 6 months later,
that we had concluded the museum                      on their second try. We were concerned
lacked an adequate financial disclosure               that EAR lacked internal procedures for
policy for the awards reviewed. In view               “holding over” proposals and that EAR’s
of the museum’s written response, we                  practice could lead to an appearance of
examined this newly offered conflict-of-              favoritism. We recommended that EAR
interests policy and found it inadequate              describe the practice in its Program
to meet the requirements of NSF’s                     Announcement. NSF’s Assistant Director
Investigator Financial Disclosure Policy.             for Geosciences responded that EAR’s
                                                      “hold over” policy was referenced in a
We considered this noncompliance to be
                                                      “Dear Colleague” letter, dated August 15,
serious because the museum’s AOR
                                                      1994, which is also available on-line
wrongly certified on 13 proposals to NSF
                                                      through NSF’s Science and Technology
that the museum had a written and
                                                      Information System. The Assistant
enforced conflict-of-interests policy and
                                                      Director stated that the Division chose
that, to the best of his knowledge,
                                                      not to include an explanation of “holding
disclosures had been made; NSF funds
                                                      over” proposals in its Program
had already been awarded on 2 of the 13
                                                      Announcement because it might
proposals; and the museum was
                                                      encourage PIs to pressure EAR program
considerably delinquent in implementing
                                                      directors to “hold over” their proposals.
a conflict-of-interests policy.
                                                      We also recommended that NSF’s EAR


Semiannual Report Number 16                      66             NSF Office of Inspector General
develop a set of internal procedures for          • We recommended that the museum
program directors to follow when using              institute a regularly scheduled
this “hold over” practice. The Assistant            museum-wide safety inspection of all
Director responded that the practice is a           laboratory facilities. The museum said
useful management tool, that there is no            it plans to implement a regularly
indication of misuse, and that additional           scheduled museum-wide safety
policy overlays are not required. He                inspection to supplement its existing
noted that the Advisory Committee for               safety program.
Geosciences recently approved the
practice and said he would request that
future Committees of Visitors monitor it.


Other Recommendations

• We recommended that the museum
  either revise its collections and
  records retention policy to address the
  retention of data and materials that are
  NSF-supported but not part of the
  museum’s collections, or develop a
  separate policy to address this issue.
  The museum said it will prepare a
  grant guide for scientists that will
  resolve this issue.




Semiannual Report Number 16                  67            NSF Office of Inspector General
INTERNAL INSPECTIONS                                 THE WESTERN EUROPE
                                                     PROGRAM
We designed our internal inspections pro-
gram to help NSF fully implement GPRA.               Background
GPRA requires that federal agencies
develop strategic plans that include mission         Since NSF's inception in 1950, an
statements, outcome-based goals and
objectives, descriptions of how goals will be        integral part of its mission (to promote the
achieved, and a performance plan tied to             progress of U.S. science and
the strategic plan. Beginning in FY 1999,
agencies will be required to prepare annual          engineering) has been to support
reports that integrate financial and per-            international science activities. The
formance information, and offices of inspec-
tor general will be required to review those         principal rationale for this function is to
statements for accuracy. Internal inspec-            provide access for U.S. scientists,
tions will help us understand how NSF
managers at the program and division levels          engineers, and educators to intellectual
administer their programs and generate the
                                                     resources, unique facilities, and unusual
information that NSF will use to measure
program performance and results.                     field sites on a worldwide basis.

Because NSF has not yet identified specific
                                                     INT’s special functions are to expand and
outcome performance measures or the data
that will be used to support them, we have           facilitate the international dimension of
devised a review that addresses four broad
                                                     NSF’s mission by promoting and sup-
areas: (1) the adequacy of NSF's financial
rules and procedures in ensuring proper use          porting new partnerships between U.S.
of NSF funds, (2) the efficiency and
                                                     scientists and engineers and their foreign
effectiveness of NSF's internal operations,
(3) the level of customer satisfaction with          colleagues. INT supports an array of
NSF’s programs and operations, and (4) the
                                                     activities designed for individuals and
capacity of NSF to make valid claims about
program performance and goal achieve-                small groups, and it encourages U.S.
ment. Internal inspections stress the
                                                     organizations and institutions to consider
relationships among programmatic, adminis-
trative, and financial considerations in the         projects aimed at establishing or
overall administration of NSF’s programs.
                                                     strengthening relationships with foreign
We conducted our first NSF internal                  counterparts.
inspection on the Western Europe Program
(WEP) of the Division of International
Programs (INT) in the Directorate for Social,
Behavioral and Economic Sciences (SBE).



  Semiannual Report Number 16                   68              NSF Office of Inspector General
WEP is one of six regional groupings in          Financial Measures
INT. The Western Europe Region
                                                 We reviewed the WEP-funded research
includes 17 countries and several
                                                 and verified that the awards were for
multilateral organizations. WEP is
                                                 activities related to WEP's budgeted
staffed by four NSF employees: a
                                                 goals and objectives. We found that
program coordinator, two program
                                                 essential award information in the
managers, and one senior program
                                                 financial accounting system and the
assistant.
                                                 award system corresponded to that in the
In FY 1996, WEP was allocated                    program jackets. We also found that INT
$1,573,190 of INT’s $17,441,949 budget           complied with the main features of the
and processed 200 proposals that                 Federal Managers’ Financial Integrity
resulted in 106 awards. About 90                 Act. INT had performed an internal
percent of WEP’s funding is distributed          control risk assessment and identified
through cooperative research projects.           internal control responsibilities in the
Virtually all of the remainder is used to        performance plans for key officials.
fund workshops and dissertation
                                                     International Implications Report.
enhancement awards.
                                                 NSF’s International Implications Report is
We reviewed seven grants awarded by              used to provide answers to questions
WEP to support cooperative research              from the U.S. Department of State and
between the United States and Austria,           foreign counterparts about trends and
the European Union, Germany, Greece,             fields of interest and to brief NSF's
Italy, and Sweden. Three of these                Director on NSF’s foreign research
awards were split-funded with programs           involvement. Both INT and WEP program
in the divisions of atmospheric science,         staff members emphasized that the report
biology, and chemistry. We also                  is the only document that provides in-
reviewed three declined proposals, two           depth coverage of NSF’s international
withdrawn proposals, and one                     investment.
inappropriate proposal.



Semiannual Report Number 16                 69              NSF Office of Inspector General
We found that the utility of the                     how much they received. We recommen-
International Implications Report as a               ded that INT develop better mechanisms
financial measure of NSF’s international             for readily identifying its awards by
science and engineering activities was               country or entity and describing how its
minimal. The report does not                         total award dollars are divided among
                                                     different countries or entities.
•   include all awards with international
    implications,                                    INT responded that its current
                                                     mechanisms, though cumbersome, are
•   accurately reflect the actual dollar
                                                     accurate. It said that it is investigating
    amount of international implications of
                                                     alternatives that involve modifying some
    the awards entered into the report,
                                                     current NSF standard reports.

•   accurately record the amount of
                                                     Internal Operations
    money budgeted for foreign travel in
    individual awards, or                            WEP's work includes management of the
                                                     proposal evaluation and award process
•   limit data entries to foreign travel that
                                                     and staff service as "country desk"
    advances the nation’s position in
                                                     officers to NSF’s senior management and
    international science and engineering.
                                                     program officers, OSTP, and other
We recommended that INT work with                    government agencies.
other NSF components to ensure that the
                                                     WEP’s program officers were articulate
report is complete and accurate. INT
                                                     and committed spokespersons for their
agreed to do so.
                                                     program. We found that stagnation in
    Western Europe Program Award                     WEP’s budget and uncertainty about
Dollars by Country or Entity Report.                 INT’s organizational home in NSF
INT could not readily determine which                adversely affected program officers’
countries or entities within the Western             morale.
Europe region received WEP funding and




Semiannual Report Number 16                     70              NSF Office of Inspector General
    Conflicts-of-Interests Training.                OGC maintains a database of the names
In 1992, NSF established a program of               of the individuals who attend the conflicts
annual mandatory conflicts training for all         training. However, this database is not
NSF officials at or above the program               cumulative—each new entry replaces the
officer level. OGC was tasked to conduct            previous entry, leaving no record of the
conflicts briefings, arrange scheduling,            earlier training. We suggested that OGC
notify staff, and monitor compliance with           consider changing its database to make it
this directive. We found that none of the           cumulative.
four INT staff members we sampled
                                                    We recommended that INT ensure that
attended this mandatory training in 1995.
                                                    •   each professional member of its staff
OGC gives NSF-wide conflicts training
                                                        completes NSF's annual mandatory
sessions periodically throughout the year
                                                        conflict-of-interests training and
and, upon request, gives conflicts training
to specific offices or divisions. Although          •   records are updated and maintained
OGC notifies staff members in October if                on staff attendance for at least a
they have not yet taken training in that                5-year period.
calendar year, it does not follow up with
individuals who fail to take the training in        INT agreed that appropriate NSF staff

a given year, so, essentially, this                 should attend these sessions and that

mandatory training operates on the honor            management should ensure that this

system. We suggested that OGC consult               occurs. Also, OGC implemented our

with NSF management to establish some               suggestion for a system of cumulative

mechanism to help ensure that                       records on completion of mandatory

employees’ supervisors are informed                 conflict-of-interests training.

when employees fail to attend the
mandatory conflicts training.




Semiannual Report Number 16                    71              NSF Office of Inspector General
Customer Measures                                  To monitor whether it is funding “new”
                                                   researchers, INT counts the number of
WEP serves a variety of customers.
                                                   PIs, postdoctoral fellows, and graduate
NSF’s senior management and program
                                                   students and undergraduate students
officers, Department of State officials,
                                                   associated with WEP awards who have
and science counselors working for
                                                   not received INT support within the last 5
foreign embassies are the main
                                                   years. Without further refinement, this is
customers for WEP’s “country desk”
                                                   not, in our view, a valid measure of how
activities. Potential program customers
                                                   many PIs are “new” to international S&E
include PIs, postdoctoral fellows, and
                                                   collaborations.
graduate and undergraduate students
from all NSF-funded research areas.                We were able to identify two important
Consistent with INT policy, WEP focuses            sources of information on customer
on program customers who are just                  satisfaction for WEP programs. One
starting a research career and are new to          source was the most recent Committee of
international collaborations. WEP’s                Visitors Report (December 15, 1994),
customer base also includes the institu-           which covered all INT programs,
tions that sponsor these individuals. We           including WEP. This Committee of
believe it will be important to have/              Visitors "observed" that all projects
develop measures of how well WEP                   assisted U.S. scientists to engage in
serves all categories of its customers.            meritorious international research
                                                   collaborations and that these
At the time of our inspection, WEP had
                                                   collaborations involved large numbers of
no measures of the long-term effect of its
                                                   younger scientists. However, the
awards. Some measures had been
                                                   Committee of Visitors expressed concern
considered, but they involved the
                                                   about the timeliness with which NSF
relatively high costs of longitudinal
                                                   processed proposals.
surveys and were characterized by INT
officials as “questionably cost-effective.”




Semiannual Report Number 16                   72              NSF Office of Inspector General
Our second source of customer                     Mission (Goals and Objectives)
                                                  Measures
satisfaction information was NSF’s
Customer Satisfaction Report for Fiscal           We searched for strategic plans relevant
Year 1996. For FY 1995, NSF                       to understanding WEP goals and
established a customer service standard           objectives and any corresponding
for timeliness in proposal processing.            performance measures that had been
NSF’s goal was that, for 95 percent of            developed. After we identified suggested
proposals to the agency, proposal                 performance measures, we looked into
processing divisions should decide                their quality as measures. Because
whether to recommend funding within 6             NSF’s GPRA Strategic Plan has not yet
months of when NSF received the                   been finalized, the relevance of INT’s
proposal. According to the Customer               performance measures to NSF’s GPRA
Satisfaction Report, in FY 1995 the               objectives remains uncertain.
agency met this goal for 50 percent of its
                                                  We were pleased to find that in August
proposals. The report also provided
                                                  1994, at the request of SBE, INT
results of a June 1996 survey of
                                                  developed both a strategic plan and a set
university-sponsored research offices.
                                                  of performance measures to cover its
The survey showed that all of the offices
                                                  program and staff functions: DIVISION
favored decisions in 6 months or less.
                                                  OF INTERNATIONAL PROGRAMS
INT officials told us that the division’s
                                                  STRATEGIC PLAN, 1995-1999 (INT
current response time is approximately
                                                  PLAN). Shortly afterwards, NSF
7 months. We reviewed NSF’s standard
                                                  reorganized its central planning and
Overage Proposal Report for October 18,
                                                  assessment functions. INT’s plans and
1996, and found that less than 2 percent
                                                  proposed measures have remained in
of the WEP pending proposals were in
                                                  abeyance since that time “pending”
process for 6 months or longer.
                                                  NSF’s decisions on how to establish a
                                                  management system to comply with
                                                  GPRA requirements.




Semiannual Report Number 16                  73             NSF Office of Inspector General
The INT PLAN is generally consistent               In keeping with GPRA, NSF’s 1996 draft
with NSF’s most recent (1994) strategic            GPRA Strategic Plan for FYs 1999-2001
plan, NSF IN A CHANGING WORLD                      attempts to translate the agency’s current
(NSF 95-24) and SBE’s 1995 strategic               strategic plan into operational terms.
plan, TOWARD SBE 2000. The INT                     Among the eight NSF objectives listed in
PLAN suggests possible output and                  this draft, at least five appear to involve
outcome measures corresponding to its              INT activities. Many of the measures that
seven objectives. Although the INT                 NSF is considering using involve an
PLAN was designated as a 5-year plan,              international dimension. In 1997, as NSF
there were no benchmarks set for any of            finalizes its GPRA planning and
the 5 years. We were told that one test            performance measures, INT will have to
run of these measures was made on the              adapt its early efforts to the NSF-wide
Eastern Europe Program.                            perspective. To the extent that
                                                   international activities are part of the
We reviewed and commented on each of
                                                   NSF-wide GPRA strategic plan and its
the measures in the INT PLAN. Among
                                                   goals, INT should play a leading role in
our observations was that some of the
                                                   developing meaningful measures of NSF
measures that INT has proposed relate to
                                                   performance.
country support within the Western
Europe region. These measures will be
problematic if the WEP does not improve
its ability to readily generate data on the
dollar amounts of NSF awards to
individual countries.




Semiannual Report Number 16                   74              NSF Office of Inspector General
EVALUATIONS
This section summarizes reviews we conduct concerning the efficacy of NSF policies
and procedures. We summarize recommendations we made to NSF about competition
with private companies, describe our review of university policies on handling alleged
student misconduct, and report NSF's response to our recommendations about the
introduction of non-indigenous organisms into Antarctica. Finally, we describe
representational activities by our staff.
                                                    conditions in response to our recommen-
NSF Needs to Clarify
Non-Competition Policy                              dations in Semiannual Report Number 2
                                                    (page 16) that NSF take action to make
In response to a request from the Chair-
                                                    IN-91 enforceable:
man of the House Committee on Science,
we reviewed a number of allegations of                Competition. The grantee shall not
violations of NSF Important Notice 91 (IN-            use equipment acquired with Federal
                                                      funds to provide services to non-
91). IN-91, which was approved by the                 Federal outside organizations for a fee
                                                      that is less than private companies
NSB in 1983, states:                                  charge for equivalent services, unless
                                                      specifically authorized by statute.
  It is contrary to the NSF’s intent for
  grantees     to  use     NSF-supported            NSF also developed different procedures
  research instrumentation or facilities to
  provide services for a fee in direct              to handle allegations stemming from this
  competition with private companies that
  provide equivalent services.
                                                    policy, as compared to its procedures for

IN-91 permits use of NSF-funded equip-              handling allegations from IN-91.

ment and facilities by private industry only
                                                    We reviewed a number of university
under two circumstances: on a collabo-
                                                    facilities about which there had been
rative basis with an academic scientist, or
                                                    complaints that equipment or facilities
when equivalent services are not avail-
                                                    were used to provide services in violation
able commercially. However, because
                                                    of IN-91. We found that the NSF-funded
NSF has other less restrictive policies on
                                                    equipment and facilities that we reviewed
the appropriate use by industry of NSF-
                                                    fell into two groups: advanced, very
funded equipment and facilities, grantees
                                                    expensive instrumentation provided to a
vary in their policies on industrial use of
                                                    multiuser facility for use by a broad
such equipment. One less restrictive
                                                    segment of the scientific community, or
policy was added to NSF’s grant
Semiannual Report Number 16                    75              NSF Office of Inspector General
expensive but conventional equipment               they promote noncollaborative use of the
provided to an individual investigator or          equipment and do not specify the true
department. We concluded that industrial           rates for its use. Although these policies
use of the latter type of equipment was            encouraging industrial involvement may
minimal. By contrast, we found significant         be consistent with NSF’s core strategy of
industrial use of NSF-funded major shared          promoting partnerships among industry
instrumentation and facilities, under              and the academic community, they also
circumstances that raise concerns about            put private companies at a competitive
competition with private companies.                disadvantage because their customers
                                                   have the option of using NSF-funded
We learned that NSF programs that
                                                   equipment rather than what is available
support major shared instrumentation or
                                                   commercially. The inconsistent provisions
facilities often specifically encourage—
                                                   set out in IN-91, the grant conditions, and
and sometimes require—commitments for
                                                   the stated or de facto policies of NSF’s
industrial participation. To promote open
                                                   programs send mixed messages
access to the equipment, some NSF-
                                                   regarding the appropriate use of major
funded facilities had nominal rates for all
                                                   shared instrumentation funded by NSF.
users, including those from industry, when
                                                   Industrial access to this instrumentation
the equipment was used to accomplish
                                                   through industrial affiliate programs may
publishable (rather than confidential
                                                   also contribute to usage inconsistent with
proprietary) research. Other facilities had
                                                   IN-91 and/or the grant conditions.
higher rates but still undercut the cost of
similar services offered commercially.             We recommended that NSF assign
Industrial usage was not limited to the            responsibility to someone with NSF-wide
provision of services that could not be            authority to develop a consistent and
obtained commercially, nor did it depend           enforceable policy regarding the use by
on collaboration with facility staff.              the for-profit sector of different types of
Industrial affiliate programs, in which            NSF-funded equipment and facilities and
private companies pay a flat annual fee            to evaluate and resolve complaints of
for access to equipment plus other                 violations of the policy. NSF’s revised
benefits, also raise concerns because              policy should also address whether

Semiannual Report Number 16                   76               NSF Office of Inspector General
grantees’ industrial affiliate programs that        NSF’s Director recently responded to our
provide access to NSF-funded equipment              report. He advised us that he plans to
are consistent with NSF policy. After NSF           refer the issue of inconsistent policies
implements a clear and enforceable                  governing the use of NSF-funded
policy, appropriate corrective action               equipment to the National Science Board
should be taken so that NSF-funded major            for its consideration. We recommended
shared instrumentation and facilities               that NSF ensure that whatever policy the
comply with NSF’s revised policy.                   Board adopts should be its exclusive
                                                    policy, and the Board should rescind any
When it reported the NSF Authorization
                                                    policies that are inconsistent. The
Bill for fiscal year 1998 to the full House
                                                    Director’s response treats the issue of
for consideration, the House Committee
                                                    industrial affiliate programs as an
on Science expressed its “concern about
                                                    operational issue to be addressed after
NSF’s enforcement of Important Notice
                                                    the Board has resolved the
91” and noted that “[s]till too often, the
                                                    inconsistencies in formal policies. We
Committee is receiving complaints of
                                                    recommended that the Director evaluate
universities in competition with the private
                                                    and address this issue before presenting
sector.” The Committee concluded that it
                                                    his recommendations to the Board.
“strongly endorses university/private
sector collaboration,” but “does not desire
to see federal resources used to compete
against private sector interests.”




Semiannual Report Number 16                    77              NSF Office of Inspector General
Institutions Need to Review                        These concerns prompted us to conduct a
Policies for Responding to                         policy review on how allegations of
Allegations of Student Misconduct
                                                   student misconduct in science and
in Science and Engineering
                                                   engineering are handled.
In our on-site inspections of NSF-grantee
institutions, we always review the institu-        NSF’s Misconduct in Science and
tion’s Misconduct in Science and Engine-           Engineering regulation (45 CFR part 689)
ering Policies and Procedures (MS&E                describes an NSF-grantee partnership for
Policies). We review the MS&E Policies,            oversight of the ethical practices
in part, to determine how cases against            associated with NSF-supported activities.
students who are alleged to have com-              The partnership places the primary
mitted misconduct in science in connec-            responsibility for preventing and detecting
tion with an NSF-supported activity are            misconduct in science associated with
handled administratively. In more than             NSF-supported activities with the grantee.
75 percent of our published inspection             As NSF support for science and
reports that contain a discussion about            engineering educational activities
how such allegations are handled, we               increases, a broader group of
describe concerns that range from the              undergraduate and graduate students is
absence of, to the lack of clarity about,          becoming involved. Consequently, for an
student coverage in the grantee’s MS&E             effective NSF-grantee partnership,
Policy. In addition, our experiences with          policies and procedures at institutions that
cases of alleged student misconduct in             address misconduct in science issues
science that are processed under institu-          need to clearly include any student
tions’ student Academic Misconduct                 involved in an NSF-supported activity.
Policies have raised concerns about the            We reviewed the existing policies and
timely notification of NSF and the lack of         procedures at 11 large, publicly funded
information necessary to evaluate an               institutions to learn how cases involving
allegation of misconduct in science (see           students alleged to have committed
Semiannual Report Number 11, page 31).             misconduct in science would be handled.




Semiannual Report Number 16                   78              NSF Office of Inspector General
    Misconduct in Science and                           Student Coverage Under MS&E
Engineering Policies and Procedures.                Policies and Academic Misconduct
MS&E Policies apply to faculty members              Policies. Three of the 11 MS&E Policies
and frequently to other staff members at            refer to the Academic Misconduct Policies
the institutions. Eight of the institutions’        to handle alleged misconduct in science
MS&E Policies also include “students.” Of           by students. The remaining institutions’
the remaining three MS&E Policies, one              MS&E Policies and Academic Misconduct
refers only to graduate students and                Policies are ambiguous about which
states that they are covered by the                 policy applies to alleged student mis-
student Academic Misconduct Policies;               conduct for certain allegations where both
one excludes all students and provides              policies cover students. For example, all
that allegations against them be handled            the Academic Misconduct Policies and
through Academic Misconduct Policies;               MS&E Policies in this study list plagiarism
and one provides insufficient information           as an act of misconduct. In practice, an
to judge whether students are included.             allegation of plagiarism against a student
Five of the eight MS&E Policies that                involved in an NSF-supported activity
include “students” define misconduct in             could be pursued under either Policy. In
science to cover research and non-                  a few instances, this jurisdictional ambi-
research activities.                                guity is recognized by the institution, and
                                                    the MS&E Policies include language that
    Academic Misconduct Policies. In
                                                    directs all student conduct concerns to the
contrast to MS&E Policies, Academic
                                                    official responsible for administering the
Misconduct Policies are exclusively for
                                                    Academic Misconduct Policies. A com-
students. Also, the Academic Misconduct
                                                    parable statement directing student
Policies usually define misconduct in
                                                    conduct concerns to the official respon-
broad terms. For example, the Academic
                                                    sible for overseeing the MS&E Policies
Misconduct Policy notes that “The
                                                    when federal support is involved does not
description of prohibited conduct set forth
                                                    appear in any of the Academic Miscon-
herein shall be interpreted broadly and is
                                                    duct Policies. At all 11 institutions,
not designed to define misconduct in
                                                    separate officials are responsible for
exhaustive terms.”
Semiannual Report Number 16                    79               NSF Office of Inspector General
administering the 2 Policies. Because                review would help ensure that each
there is no complete “information loop”              institution is upholding its end of the
between the designated officials over-               partnership with NSF in its oversight
seeing the 2 separate Policies at any of             responsibilities of ethical issues.
the 11 institutions, a misconduct in
                                                     Concerns About the Possible
science allegation against a student that
                                                     Introduction of Non-Indigenous
advances to an investigation under the               Organisms in the Antarctic
Academic Misconduct Policy and that
                                                     The Antarctic Conservation Act prohibits
involves an NSF-supported activity would
                                                     U. S. citizens from introducing “any animal
not necessarily be relayed to the MS&E
                                                     or plant that is not indigenous to
Policy official.
                                                     Antarctica” into Antarctica “unless
NSF does not mandate any specific pro-               authorized by regulation . . . or a permit”
cedure or reporting method for institutions’         issued by NSF. The question of whether
oversight responsibilities. However, it is           a particular strain of Escherichia coli was
important that institutions’ Policies include        not indigenous to Antarctica and therefore
all students who receive or participate in           required a permit for its introduction arose
NSF-supported activities and establish a             during the 1994-1995 season. NSF
process to notify NSF of any inquiry that            determined that these bacteria were
leads to an investigation. None of the 11            indigenous to the Antarctic, and that no
Academic Misconduct Policies includes a              permits were necessary for bringing
provision for notification of NSF.                   E. coli or genetic variants of this species
                                                     to the Antarctic. We were concerned that
Institutions should review their existing
                                                     NSF’s decision to classify E. coli, and all
MS&E Policies and Academic Misconduct
                                                     of its genetic variants, as indigenous to
Polices to ensure that, whatever Policy is
                                                     the Antarctic was more broad than was
used, an appropriate procedure is in place
                                                     appropriate.
to notify NSF of any misconduct in sci-
ence allegation against a student involved
in any NSF-supported activity that advan-
ces to the investigation stage. Such a

Semiannual Report Number 16                     80              NSF Office of Inspector General
We recommended that NSF adopt a                     Staff Activities
policy that any laboratory culture of
                                                    An Oversight scientist participated in and
microorganisms is presumptively non-
                                                    spoke at a PRACTICUM sponsored by the
indigenous to the Antarctic. We also
                                                    American Association for the Advance-
recommended that NSF program officers
                                                    ment of Science on Responding to
ensure that any proposed on-site
                                                    Allegations of Research Misconduct:
recombinant DNA (rDNA) experiments
                                                    Inquiry and Investigation held in San
receive prior approval, if required, from
                                                    Diego, California, from January 26
the grantee institution’s rDNA biosafety
                                                    through 28, 1997; another presented a
committee. In response to our recommen-
                                                    paper in a session on The Report of the
dations, NSF agreed “to reinstate the
                                                    Commission on Research Integrity at the
requirement that all laboratory cultures of
                                                    annual meeting of the Association for
microorganisms proposed for importation
                                                    Practical and Professional Ethics, from
into Antarctica, regardless of their origin,
                                                    March 6 through 8, 1997; and a third
be listed on a permit application . . .
                                                    chaired a session on Issues in Research
beginning with the 1997/98 season.” NSF
                                                    Ethics at the same Association for
is considering our recommendation
                                                    Practical Professional Ethics meeting.
concerning the prior approval of on-site
rDNA experiments by a grantee
institution’s rDNA biosafety committee.




Semiannual Report Number 16                    81              NSF Office of Inspector General
Audit Reports Issued With
Recommendations for Better Use of Funds


                                                                           Dollar Value

A. For which no management decision has been made                          37,385,100
   by the commencement of the reporting period

B. Recommendations that were issued during the                             64,020,102
   reporting period (these were issued in ten reports)

Subtotal of A+B                                                            101,405,202

C. For which a management decision was made during                         36,998,657
   the reporting period

   (i) dollar value of recommendations that were agreed
       to by management

      based on proposed management action                                  12,202,565

      based on proposed legislative action                                           0

   (ii) dollar value of recommendations that were not                      24,796,092
        agreed to by management

D. For which no management decision had been made                          64,406,545
   by the end of the reporting period

For which no management decision was made within 6                          1,466,900
months of issuance




 Semiannual Report Number 16              82             NSF Office of Inspector General
Audit Reports Issued With Questioned
Costs



                                                  Number   Questioned    Unsupported
                                                                Costs          Costs

A. For which no management decision has been          73     9,611,016     4,099,345
   made by the commencement of the reporting
   period

B. That were issued during the reporting period       25     2,779,937     1,861,527


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

Subtotal of A+B+C                                     98   12,390,953      5,960,872

D. For which a management decision was made           59     5,392,592     3,392,651
   during the reporting period

      (i) dollar value of disallowed costs           N/A     1,043,405           N/A

      (ii) dollar value of costs not disallowed      N/A     4,349,187           N/A

E. For which no management decision had been          39     6,998,361     2,568,221
   made by the end of the reporting period

For which no management decision was made             17     4,339,500     1,384,994
within 6 months of issuance




 Semiannual Report Number 16                 83    NSF Office of Inspector General
Additional Performance Measures

As required by the Inspector General Act of         demonstrate that a grantee has in fact not
1978, we provide tables in each Semi-               met cost-sharing obligations; these findings
annual Report to the Congress that give             result in formal questioned costs. The
statistical information on work conducted by        table on page 85 provides statistical
our audit and investigation units.                  information about shortfalls occurring
                                                    during the course of a project and at the
Tables that provide statistics concerning           completion of the project.
these required performance measures are
on pages 44, 82, and 83. GAO and OMB                Auditors who conduct financial statement
suggested that Offices of Inspector General         audits at grantee organizations may identify
develop additional performance measures             a general deficiency concerning cost
that provide information about their                sharing (which we classify as a
activities. As a result, we developed two           “compliance finding”) but often do not
additional performance measures to                  identify the amount of a cost-sharing
provide additional insights about the work          shortfall (which we classify as a “monetary
of our office. The two additional measures          finding”) because it is not material in the
are “Systemic Recommendations” and                  context of the organization’s overall
“Cost Sharing Shortfalls.”                          financial statement presentation. We track
                                                    both monetary and compliance findings that
COST-SHARING SHORTFALLS—NSF                         involve cost sharing.
seeks to leverage its resources by acting
as a catalyst, promoting partnerships, and,         SYSTEMIC RECOMMENDATIONS—OIG
in some cases, obligating grantees to               staff members regularly review NSF’s
contribute substantial nonfederal resources         internal operations. These reviews often
to a project. When NSF award documents              result in systemic recommendations that
require substantial cost sharing, we seek to        are designed to improve the economy and
determine whether grantees are in fact              efficiency of NSF operations.
providing promised resources from
nonfederal sources.                                 We routinely track these systemic
                                                    recommendations and report to NSF’s
We divide cost-sharing shortfalls into two          Director and Deputy Director quarterly
categories. Shortfalls occurring during the         about the status of our recommendations.
life of a project indicate that the grantee         The table on page 86 provides statistical
may not be able to provide all promised             information about the status of all systemic
resources from nonfederal sources before            recommendations that involve NSF’s
completing the project. Shortfalls that             internal operations.
remain when a project is complete




Semiannual Report Number 16                    84              NSF Office of Inspector General
  Audit Reports Involving Cost-Sharing Shortfalls
                                                                                    At Risk of         Cost-
                                                                                      Cost-           Sharing
                                                                                     Sharing         Shortfalls at
                                                    Number           Cost           Shortfall/       Completion
                                                      of            Sharing         (Ongoing           of the
                                                    Reports        Promised          Project)         Project*
A. For which no management
decision has been made by the
beginning of the reporting period
    1. Reports with monetary                          N/A             N/A               N/A               N/A
    findings
    2. Reports with compliance                        N/A             N/A               N/A               N/A
    findings
B. That were issued during the
reporting period
    1. Reports with monetary                            9         29,206,405        15,691,416         273,496
    findings
    2. Reports with compliance                          9             N/A               N/A               N/A
    findings
Total of Reports With Cost-Sharing                     18         29,206,405       15,691,416          273,496
Findings (A1+A2+B1+B2)
C. For which a management
decision was made during the
reporting period
    1. Dollar value of cost-sharing                     0               0                0                    0
    shortfall that grantee agrees to
    provide
    2. Dollar value of cost-sharing                     1          1,882,061             0              51,774
    shortfall that management
    waives
    3. Compliance                                       0             N/A               N/A               N/A
    recommendations with which
    management agreed
    4. Compliance recommendation                        0             N/A               N/A               N/A
    with which management
    disagreed
D. For which no management
decision has been made by the end
of the reporting period
    1. Reports with monetary                            8         27,324,344        15,691,416         221,722
    findings
    2. Reports with compliance                          9             N/A               N/A               N/A
    findings
  •   These findings result in questioned costs and are also identified in our table on questioned costs on
      page 83.



   Semiannual Report Number 16                         85               NSF Office of Inspector General
Status of Systemic Recommendations
That Involve Internal NSF Management
Open Recommendations
Recommendations Open at the Beginning                                              47
of the Reporting Period

New Recommendations Made During                                                    35
Reporting Period

Total Recommendations to be Addressed                                              82

Management Resolution1 of Recommendations
Recommendations Awaiting
Management Resolution                                                                8

Recommendations Resolved by Management                                             74

     Management Agrees to Take Reasonable Action                                   74

     Management Decides No Action is Required                                        0


Final Action2 on OIG Recommendations
Final Action Completed                                                             37

Recommendations Open at End of Period                                              45




1
  “Management Resolution” occurs when management completes its evaluation of an OIG recommendation
and issues its official response identifying the specific action that will be implemented in response to the
recommendation
2
   “Final Action” occurs when management has completed all actions it had decided are appropriate to
address an OIG recommendation.


    Semiannual Report Number 16                     86               NSF Office of Inspector General
Aging of Open Recommendations
Awaiting Management Resolution:

  0 through 6 Months                                                  8

  7 through 12 Months                                                 0

  more than 12 Months                                                 0

Awaiting Final Action After Resolution
  0 through 6 Months                                                 21

  7 through 12 Months                                                 5

  13 through 18 Months                                                7

  19 through 24 Months                                                1

  more than 24 Months                                                 3


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
 Report Title                   Date                         Issue
 Review of NSFNET             03/23/93   Audit of Infrastructure Account
 Peer Review Process
 (2 recommendations)          09/29/93   Issue Formal Guidance on Confidentiality




Semiannual Report Number 16               87            NSF Office of Inspector General
List of Reports
                                                 NSF and CPA Performed Reviews
Number                      Subject                Questioned   Unsupported     Better Use
                                                     Costs         Costs         of Funds
97-1001   School District                           108,398        51,774           0

97-1002   Museum                                    128,108         3,176           0

97-1003   Museum                                     66,994        66,652           0

97-1004   School District                           130,996        112,777          0

97-1005   Educational Nonprofit                     92,433         65,768            0

97-1006   Educational For Profit                     4,904          4,904            0

97-1007   School District                           333,753        322,089          0

97-1008   School District                            5,695          2,343           0

97-1009   School District                           25,785           718            0

97-1010   University                                451,147        222,080          0

97-1012   Non Profit Society                        341,057        302,495           0

97-2101   Review of Process Used to Purchase
          PCs at NSF                                   0              0             0

97-2102   Audit of NSF Statements                      0              0              0

97-2103   Review of Infrastructure Awards           109,209           0             0

97-2104   Review of Astronomy Observatories            0              0         2,195,715

97-2105   Review of FFRDC                           641,129           0             0

97-2106   Review of Astronomy Laboratory               0              0         1,172,465

97-2107   Review of Funding for Development            0              0         60,000,000
          of the INTERNET



Semiannual Report Number 16                 88         NSF Office of Inspector General
                                               Questioned   Unsupported     Better Use
Number                   Subject                 Costs         Costs         of Funds
97-2108   Review of Electricity Costs              0            0           2,200,000

97-2109   Review of Travel Expenses                0              0          300,000

97-2110   Management Letter on NSF                 0              0             0
          Statements

97-6001   For Profit Contractor                  2,304            0             0

97-6002   Public Television Network                0              0              0

97-6003   School District                        11,944           0              0

97-6004   Non Profit Educational Association       0              0             0

97-6005   Small Business Grantee                   0              0          172,002

97-6006   Small Business Grantee                   0              0           17,700

97-6007   Small Business Grantee                   0              0           25,683

97-6008   Small Business Grantee                   0              0           11,550

97-6009   Small Business Grantee                   0              0          120,702

97-6010   National Laboratory                   148,398           0              0

97-6011   Educational Council                    54,423           0             0

97-6012   Educational Service Center               0              0             0

97-6013   School District                         412             0             0




Semiannual Report Number 16               89       NSF Office of Inspector General
NSF-Cognizant Reports
                                                 Questioned       Unsupported
Number                     Subject                 Costs             Costs

97-4001   Science & Technology Foundation            0                  0

97-4002   Film Network                               0                  0

97-4003   Institute for Public Policy Research       0                  0

97-4004   Educational Council                        0                  0

97-4005   Association                                0                  0

97-4006   Botanical Garden                           0                  0

97-4007   Botanical Garden                           0                  0

97-4008   Aquarium Institute                         0                  0

97-4009   Botanical Garden                          751               751

97-4010   Museum                                     0                  0

97-4011   Scientific Research Society                0                  0

97-4012   Educational Council                        0                  0

97-4013   Educational Association                    0                  0

97-4014   Institute                                  0                  0

97-4015   Non Profit Education Center                0                  0

97-4016   Science Center                             0                  0

97-4017   Research Center                            0                  0

97-4018   Educational Project                        0                  0

97-4019   Educational Project                        0                  0

97-4020   Museum Association                         0                  0



Semiannual Report Number 16                 90     NSF Office of Inspector General
                                               Questioned       Unsupported
Number                 Subject                   Costs             Costs
97-4021   Science Academy                          0                0

97-4022   Non Profit Organization                2,484                0

97-4023   Scientific Society                     1,924                0

97-4024   Museum                                   0                  0

97-4025   Science Association                      0                  0

97-4026   Research Consortium                      0                  0

97-4027   Research Center                          0                  0

97-4028   Science and Educational Foundation       0                  0

97-4029   Educational Council                      0                  0

97-4030   Museum                                   0                  0

97-4031   Non Profit Grantee                       0                  0




Semiannual Report Number 16             91       NSF Office of Inspector General
Other Federal Audits
                                          Questioned       Unsupported
Number                     Subject          Costs             Costs
97-5016   Southern State                   114,734           113,900

97-5051   University                         795                 0

97-5065   University                        1,260                0

97-5066   Institute of Technology            900                 0




Semiannual Report Number 16          92     NSF Office of Inspector General
 Audit Reports With Outstanding
 Management Decisions
 This section identifies audit reports involving questioned costs and funds put to better use
 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. At the end of the reporting
 period, there were 17 audit reports with questioned costs and 2 reports with recommen-
 dations for funds to be put to better use that were not resolved. The status of systemic
 recommendations that involve internal NSF management are described on page 86.
  Report                                             Date Report        Dollar
  Number                       Title                   Issued           Value        Status

Items Involving Questioned Costs

95-1022       BBN Laboratories                           03/06/95         122,067       2
95-1042       Mr. Wizard Foundation                      03/31/95         157,780       2
95-1048       Virginia State Department of               09/01/95         317,664       1
              Education
95-1051       ASA Edison Chouest Offshore,               09/15/95         646,266       3
              Inc.
95-5722       State of South Dakota                      09/22/95         113,204       2
96-1002       North Carolina Department of               10/01/95         181,459       1
              Administration
96-1003       Texas Education Agency and                 11/14/95         514,268       3
              University of Texas
96-1009       Society of Automotive Engineers            03/26/96          33,962       1
96-1014       American Educational Research              03/20/96         211,879       3
              Association
96-1015       Blackfeet Community College                03/29/96         258,955       3
96-1018       Woodrow Wilson National                    03/27/96          24,657       1
              Fellowship
96-1024       College Board                              03/28/96         171,663       1
96-1025       Franklin Institute Science Museum          03/28/96         237,678       1
96-1027       Abt Associates                             03/28/96         828,915       3
96-1031       National Learning Center                   09/30/96         337,377       2


 Semiannual Report Number 16                 93            NSF Office of Inspector General
   Report                                             Date Report         Dollar
  Number                       Title                    Issued            Value      Status
96-2113        AMSI                                      08/28/96           4,054      1
96-5024        University of Wisconsin                    03/06/96         177,669     2


Items Involving Funds Put to Better Use


96-2106        National Bureau of Economic                03/29/96         800,000     2
               Research
96-6008        UCAR                                       09/17/96         666,900     3




Status
Codes
1 = Resolution is progressing with final action expected in next reporting period.
2 = Information requested from grantee not yet received in full.
3 = Further negotiations required prior to resolution.




  Semiannual Report Number 16                 94            NSF Office of Inspector General
                   Prepared by:

     Office of Inspector General
    National Science Foundation

   For additional copies, write:

      Office of Inspector General
          4201 Wilson Boulevard
             Arlington, VA 22230

For additional information, call:

                            Audit
                   Investigations
                 (703) 306-2001

                        Oversight
         (including misconduct in
        science and inspections)
                           Legal
                  (703) 306-2100

        Electronic Mail Hotline
                    oig@nsf.gov
Semiannual Report to the Congress
                      National Science Foundation