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 firstname.lastname@example.org Semiannual Report to the Congress National Science Foundation
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)