Letter to the Congress of the United States The Inspector General Act mandates that we independently develop factual analysis, fairly and impartially. As a component of the National Science Foundation, we are party to the Foundation’s mission of enabling discovery and education. Accordingly, we participate fully in the Foundation’s efforts to be innovative and flexible while operating efficiently and with integrity. We can best carry out our responsibilities by working in partnership with all areas of the Foundation and the communities we jointly serve. This Semiannual Report to the Congress describes models of best practice. Our Office of Audit and the Foundation’s Office of Polar Programs together developed an audit program, which identified over $20 million in administrative savings. These savings will be recognized during the transition of Antarctic logistics operations from the Navy to the Air National Guard (page 2). Our Criminal Investigations Unit continues to develop investigative findings by coordinating closely with investigators in other federal agencies and with internal audit departments in major universities (page 16). Finally, our administrative investigative program involving misconduct in science succeeds only because we rely heavily on investigative reports developed initially by universities and other funded organizations (page 26). We will build on these models of partnership in the future. In this reporting period, at the request of the Senate Committee on Commerce, Science, and Transportation, we also analyzed the Foundation’s award portfolio to determine whether funding decisions were based on political or other non-merit based criteria. We found that the Foundation’s merit-review system consistently uses reasonable and impartial criteria that are applied fairly throughout NSF’s programs (page 33). This is a time of change in key personnel for the Foundation, the National Science Board, and our office. We look forward to a collaborative dialogue so that we can work together with the Congress, the Foundation’s management, and the National Science Board to help our agency accomplish its laudable mission of education and discovery. Respectfully submitted, Philip L. Sunshine Acting Inspector General March 31, 1998 Table of Contents Audit 1 Investigations 15 Oversight 25 Statistical Data Audit 42 Investigations 53 Oversight 54 Glossary 55 Acronyms AMTRAK OIG National Railroad Passenger Corporation’s Office of Inspector General CFO Chief Financial Officer DOD Department of Defense DoEd Department of Education DOJ Department of Justice EHR Directorate of Education and Human Resources FASAB Federal Accounting Standards Advisory Board FBI Federal Bureau of Investigation GC-1 Grant General Conditions GMRA Government Management Reform Act GPM Grant Policy Manual GRT Graduate Research Traineeship IGERT Integrative Graduate Education and Research Training IPA Intergovernmental Personnel Act OMB Office of Management and Budget OPP Office of Polar Programs PAM Proposal and Award Manual PM Program Manager PP&E Property, Plant, and Equipment SBIR Small Business Innovation Research SSI Statewide Systemic Initiatives USAP U.S. Antarctic Program VSEE Visiting Scientists, Engineers, and Educators 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. Legal Reference 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 Action Has Not Been Completed 51 and 54 Section 5(a)(4) Matters Referred to Prosecutive Authorities 53 Section 5(a)(5) Summary of Instances Where None to Report Information Was Refused This Period Section 5(a)(6) List of Audit Reports 48 Section 5(a)(7) Summary of Each Particularly Significant Report Throughout Section 5(a)(8) Statistical Table Showing Number of Reports and Dollar Value of Questioned Costs 43 Section 5(a)(9) Statistical Table Showing Number of Reports and Dollar Value of Recommendations That Funds Be Put to Better Use 42 Section 5(a)(10) Summary of Each Audit Issued Before This Reporting Period for Which No Management Decision Was Made by the End of the Reporting Period 51 Section 5(a)(11) Significant Management Decisions That Were Revised None to Report This Period Section 5(a)(12) Significant Management Decisions With Which None to Report the 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, admini- strative, and program aspects of agency operations are examined. It conducts the annual audit of NSF’s financial statements, which encompass over $3.3 billion, and evaluates internal controls and data processing systems. The Office also 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. Audit Highlights Partnering Activities 2 Significant Reviews • Antarctic Flight Operations 2 • NSF’s Financial Statements 5 • Graduate Traineeship Program 6 Audits Resulting in Questioned Costs 7 Audit Resolutions 13 Statistical Data 42 NSF OIG Semiannual Report 1 March 1998 Partnering Activities In addition to conducting systematic reviews of programs based on objective criteria, we believe it is important to establish partnerships with NSF programs. The most extensive partnership to date has been established with the Office of Polar Programs (OPP). For example, on two recent projects we worked closely with OPP to shape project work plans that would accomplish its goals and objectives. We continued to work closely with OPP staff throughout these projects, providing them with updates on the progress of our work and advising them of issues and findings as we developed them. We also briefed OPP managers on our findings and recommen- dations before requesting formal comments on our draft report. This ongoing, open communication enabled OPP to address issues as they arose. In some instances, OPP addressed and began implementing our recommendations before we issued the report. Recommendations resulting from the two reviews already completed will result in a total of $23.7 million in savings and cost avoidances over a 5-year period. The Acting Director of OPP acknowledged the benefit of our partnering efforts by stating that “OPP considers [our] assessments and accompanying recommendations [to be] a tremendous benefit in [OPP’s] ongoing efforts to more efficiently and effectively manage the U.S. Antarctic Program.” We plan to expand this model of partnering to reach other NSF programs. Review of U.S. Antarctic Program Flight Operations The U.S. Antarctic Program complex and expensive, accounting for (USAP) is funded and managed by 55 percent of OPP’s $228 million NSF. Past and current administrations FY 1998 budget. determined that it is important for the United States to maintain an active and The Navy provided logistical influential presence in Antarctica. support for more than 40 years, but in Accordingly, NSF manages a 1993 announced that it would withdraw substantial research program aimed at from the USAP. The Navy’s decision understanding the Antarctic region and presented an opportunity for us to assist its relationship to the rest of the planet. OPP in evaluating and endeavoring to OPP implements the research program maximize the efficiency of transferring and coordinates the necessary logistics. functions traditionally performed by the Because Antarctica is geographically Navy to other organizations. In Semi- remote and is located in a harsh annual Report Number 17 (pages 2-5), environment, the logistics to support a we reported on the results of a robust research program are both functional review and cost analysis of NSF OIG Semiannual Report 2 March 1998 transferring support for the USAP in LC-130 Flight Operations Christchurch, New Zealand, from the Navy to OPP’s prime contractor and an During the operating season, Air National Guard detachment. We airlift of passengers, cargo, scientific verified annual net savings to the USAP and construction supplies and equip- of $13.2 million over a 5-year period, ment, and fuel to and within Antarctica and we made recommendations that is accomplished using ski-equipped would save an additional $2.8 million aircraft (LC-130s). There are currently over the same period, $2.1 million of only two operators of this aircraft: the which have been accepted and Navy’s Antarctic Development implemented. Squadron SIX (the Squadron) and the Guard. With the Navy’s decision to In this reporting period, we withdraw from the USAP, another worked with OPP to develop a similar operator for NSF’s LC-130s had to be plan for reviewing and analyzing the identified. Because the Guard has transition of flight operations. The experience flying LC-130s in the Arctic 109th Airlift Wing of the New York Air and has assisted the USAP in its National Guard (the Guard) provides Antarctic flight operations since 1988, flight operations to OPP under a it is well positioned to assume Memorandum of Agreement that is responsibility for LC-130 flight effective without time limitations. operations. Accordingly, these Although the Agreement may be operations are being transferred from terminated at any time upon mutual the Squadron to the Guard over a consent or by either party upon at least 3-year period (from 1997 through 1999) 1 year’s notice, OPP anticipates that the with joint Squadron and Guard Guard will provide flight operations operations during the transition. support for the foreseeable future. The Guard plans to hire 235 In this review, we identified additional full-time employees (USAP total potential savings of $32.7 million hires) to support the program. The over a 5-year period, beginning in FY Guard expects that OPP will pay for the 2000, the first full year of the USAP hires based on a flat composite transition. Of this amount, we verified pay rate the Guard established (one personnel savings of $11.7 million. We amount for officers and another for made recommendations for additional enlisted personnel regardless of their efficiencies and cost avoidances of actual ranks or rates). We compared $21 million over a 5-year period. NSF the cost of these personnel using the flat management generally agreed with our rate to a rate that varies by position. recommendations. We also identified We found that the amount OPP would and validated one-time transition costs pay for these personnel significantly of $79 million, of which $43.2 million exceeds actual personnel costs to the is associated with reconfiguring three Guard. Accordingly, we recommended NSF-owned aircraft to meet U.S. Air that OPP negotiate reimbursement to Force standards. the Guard that more closely reflects NSF OIG Semiannual Report 3 March 1998 actual costs. This would save could be achieved by lengthening the $1.8 million per year. rotations of USAP hires and other full- time Guard personnel. The USAP hires will be on rotational assignments to the Antarctic We made other recommen- throughout the operating season. Only dations in the areas of personnel, about 50 percent of the USAP hires will operations, ground support, aircraft and be deployed to the Antarctic at any one ski maintenance, and supply. These time. The rest of the Guard workforce additional recommendations would save in the Antarctic will consist of $1.2 million annually. Reservists and other Guard employees deployed on a temporary basis. OPP One-time will reimburse the Guard for the cost of Transition Costs USAP hires without regard to the amount of time they are actually One-time costs associated with deployed and for the temporary the transition total approximately employees based on a daily rate for $79 million: $43 million for aircraft actual time deployed. reconfiguration and $36 million in other transition costs. The majority of the Because OPP will pay for the cost is because of the concurrent USAP hires regardless of whether they operation of the Squadron and the are deployed, we recommended that a Guard, which is necessary to ensure a greater portion of deployed positions be safe and efficient transition of flight filled by USAP hires. If the USAP operations support. hires were to account for 75 percent of the positions rather than only 50 per- OPP plans to reconfigure three cent, as planned, the overall cost of LC-130 R-Model aircraft to meet U.S. personnel would be reduced by Air Force safety and operations $750,000 per year. standards. The reconfiguration and spare parts are expected to cost The Guard plans to deploy approximately $43 million. Due to the personnel for varying time periods, reconfiguration schedule, the aircraft with some scheduled to leave after as will not be available during FYs 2000 little as 2 weeks. Each rotation adds and 2001. The Guard has identified airfare, hotel, and meal and incidental alternatives to provide flight support expense costs. In addition, OPP will during these seasons, but the additional pay for days that are not actually costs have not yet been estimated. We worked because, during a 2-week recommended that OPP undertake an rotation, 1 full week is spent in travel analysis to determine whether a and rest status. A high number of commercial source can provide flight rotations also increases flight hour and operations safely, efficiently, and cost- fuel costs. We recommended fewer effectively. If, in fact, it can, OPP rotations: if only 25 percent fewer should consider integrating commercial rotations were made, OPP would save support into Antarctic flight operations $433,500 per year. These savings NSF OIG Semiannual Report 4 March 1998 and possibly avoid the costs associated Next Phase of Our Review with reconfiguring the R-Models. During the next reporting period, we will review the Guard’s FY 2000 USAP flight operations budget, and the cost of support to be provided to the Guard by other organizations. Audit of NSF’s Financial Statements We completed the second annual its capitalized property, plant, and audit of NSF’s agency-wide financial equipment (PP&E) held at sites and statements for FY 1997 to comply with facilities operated by NSF grantees and the Chief Financial Officers (CFO) and contractors. Government Management Reform (GMRA) Acts, which are intended to Because accounting policies bring more effective general and concerning treatment of these types of financial management practices to the assets were not clear last year, both government by improving systems of NSF management and OIG requested accounting, financial management, and guidance from the Federal Accounting internal controls. Standards Advisory Board (FASAB) and the Office of Management and Background on Last Year’s Budget (OMB) to determine how these FY 1996 Audit Opinion assets should be reported. On December 5, 1997, NSF received In Semiannual Report Number interim guidance from FASAB and 16 (pages 2 through 9), we reported OMB that only PP&E used in the that we had completed the audit of USAP and used within NSF NSF’s first agency-wide financial headquarters should be reported in statements for FY 1996. We did not NSF’s Statement of Financial Position. express an opinion on NSF’s 1996 As a result, the dollar value of NSF- Statement of Operations and Changes in owned PP&E held at colleges, Net Position because it was a first-year universities, and federally funded statement that reported the cumulative research and development centers was effect of NSF operations during prior, not included in the NSF’s 1997 unaudited fiscal years. The statement Statement of Financial Position. would have been impractical to audit. FY 1997 Audit Opinion We also issued a qualified opinion on NSF’s 1996 Statement of Our FY 1997 audit resulted in a Financial Position because NSF had not “qualified” opinion on both the State- maintained an adequate system to ment of Financial Position and the accurately and completely account for Statement of Operations and Changes in NSF OIG Semiannual Report 5 March 1998 Net Position. Most of the PP&E evaluate liability termination clauses reported on these statements is related that provide for accrued employee to the USAP and physically located in benefits. the Antarctic. Due primarily to the timing of the FASAB guidance and the NSF’s accounts payable balance long lead time required to travel to the on the financial statements did not Antarctic, we were not able to plan and include approximately $14 million in perform audit procedures to determine FY 1997 invoices and erroneously whether the PP&E balance, as of included approximately $4 million in September 30, 1997, was fairly invoices that did not relate to FY 1997. presented. We have developed plans to We recommended that NSF prepare audit USAP PP&E during 1998. formal written procedures for accumulating and recording the Internal Controls accounts payable balance at the end of the year, including adequate instructions During our internal controls and supervisory reviews. We also review, we found that NSF had not recommended that NSF continue to developed formal procedures for refine its performance measures by identifying liabilities arising from grant linking them to NSF’s desired outcome and contract provisions that should be goals in its strategic plan. recorded or disclosed on the financial statements. There also appears to be NSF management generally ambiguity among NSF and the agreed with our recommendations. We awardees regarding NSF’s liability for will continue to work with NSF accrued employee benefit costs. We management in an effort to arrive at recommended that NSF devise and unqualified opinions on future financial implement a mechanism for identifying statements. all liabilities arising from grant and contract provisions and review and Review of Graduate Research Traineeship Program Graduate Research Traineeship the GRT program, Integrative Graduate (GRT) awards provide support to about Education and Research Training 1,400 graduate student trainees (IGERT), was issued in 1997 and the participating in specific programs at 91 first awards are being made this year. different awardee institutions through trainee stipends, cost of education We reviewed awards made allowances, and project enhancement under the GRT program for compliance allowances. By the time the last of the with two award conditions. Because 160 GRT awards expire in 2000, it is many awards made in the first year of expected that the program will have the program were subject to cost expended $89 million. The program sharing, we reviewed compliance with announcement for the replacement for that requirement. In addition, the NSF OIG Semiannual Report 6 March 1998 program requires that all GRT trainees, As part of this review, we who are selected by the awardee studied data available to GRT program institution, be either U.S. citizens or managers through the GRT database. permanent residents. We found The GRT database contains infor- substantial compliance with both the mation, gathered from GRT awardees cost–sharing and citizenship require- through a web–based data collection ments by the awards we reviewed. system, about GRT projects and However, we found that a small trainees as well as their achievements. number of trainees who received Trainee citizenship status information in funding were not U.S. citizens or the database should allow NSF program permanent residents. managers and grant officials to identify awardees that do not comply with Our citizenship review included trainee eligibility restrictions and take 49 awards, with $26 million in total corrective actions. We recommended funding through FY 1997, supporting enhancements to the GRT (and any 552 trainees. We found only 12 subsequent IGERT) database and web– trainees who were ineligible because based data collection system that would they were not U.S. citizens or per- help program managers ensure that manent residents, and we questioned trainees supported by NSF under these $259,556 associated with these trainees. awards meet the citizenship status We recommended that NSF obtain requirements. refunds from the five awardees who supported ineligible trainees. 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. This section describes audits of NSF awardees conducted in this reporting period that involve significant questioned costs. Nonprofit Organization Has global marketplace. The cooperative Substantial Questioned Costs agreement was jointly funded by NSF and the Advanced Research Projects In 1996, NSF transferred a Agency. $9.6 million cooperative agreement from a university to its wholly owned An audit of this organization subsidiary that operates as a scientific identified total questioned costs of research and educational organization to $705,125, including costs we consider encourage and assist American industry unallowable, such as: in becoming more competitive in the NSF OIG Semiannual Report 7 March 1998 • $108,373 for consultant costs paid Systemic Initiatives in excess of the maximum NSF rate. The following discussions focus on two • $91,648 for hotel rooms that were questioned cost audits involving systemic reserved but never used. initiatives. We also conducted an inspection of • $44,241 for office equipment not a Statewide Systemic Initiative cooperative agreement. See page 37. included in the budget. Statewide Systemic • $7,004 for alcoholic beverages. Initiative Award The organization, which is required to SSIs foster systemic improve- share at least $9.6 million of the project ments to mathematics and science costs, reported over $15 million in cost education on a statewide basis. A sharing at the time of our audit. We northeastern state department of questioned $14.4 million of the reported education received an NSF Statewide cost sharing, which resulted in a Systemic Initiative (SSI) award of potential cost sharing deficit of $9,999,790. This project included such $9 million. Examples of questioned groundbreaking goals as the first state cost sharing include: an estimate of curriculum framework and implemen- time spent by visitors to the organi- tation of a new science and mathematics zation’s web page that was claimed as Master Teacher certification standard. equivalent to $953,969 worth of con- sulting; news coverage on a national Our audit questioned network that the organization claimed $1,099,207, which included problems as equivalent to $60,000 worth of related to the calculation of indirect television advertising; and magazine costs. We also identified problems articles about the organization claimed related to subcontract compliance. as equivalent to $156,850 in paid advertisements. We questioned $426,810 because indirect costs were calculated The organization agreed that using an indirect cost rate and base that about $2,000 of the alcoholic beverages were different from the rate and base should not have been claimed, but did stipulated by NSF in the award not agree with the other questioned documentation. costs. NSF management will resolve these issues during the audit resolution We identified material com- process. pliance deficiencies pertaining to the reporting and recording of subcontracts. Subcontract expenses were often reported based on the subcontract budget rather than actual costs. In addition, in several instances the sub- contractor’s fiscal year did not coincide NSF OIG Semiannual Report 8 March 1998 with the subcontract year, resulting in Our audit disclosed material untimely reconciliation and reporting. compliance weaknesses related to the school system’s ability to support salary Urban Systemic Initiative Award costs and contribute to project costs. In 1994, NSF entered into a Because the school system did cooperative agreement with a large not have an active NSF award, we urban school system providing support recommended that before making any for the grantee’s mathematics, science, future awards to the school system NSF and technology initiative. Subse- ensure that policies and procedures are quently, NSF program officials in place to safeguard federal funds spent concluded that the school system did on salaries and to meet cost-sharing not show sufficient progress toward requirements. achieving the primary goals of the cooperative agreement and, in Urban Teacher Enhancement September 1996, notified the school Award system that it would phase out the award. We subsequently performed a We conducted a financial and final audit on the award costs, and we compliance audit of an NSF award to a questioned $104,658 of the $2,595,468 northeastern city’s board of education. the school system had claimed. Our audit included six awards from NSF’s Division of Elementary, The questioned costs consisted Secondary and Informal Education, and of unallowable costs totaling $35,878 one award from NSF’s Division of and unsupported costs totaling $68,780. Human Resource Development. Of the For example: $4,818,796 claimed costs by the awardee for the seven awards, we • An employee’s full salary and questioned $2,071,176. The audit benefits were charged to the award, identified $1,671,623 that was not although the employee estimated adequately documented and related that he worked only one-half of his primarily to personnel compensation. time on the award. The audit also found $399,553 in inappropriate or unallowable costs • Stipends were paid to teachers for charged to the awards. An additional attending workshops and training $366,611 was identified as at risk for for days on which records did not cost sharing. show that the teachers were present. We identified several material • Costs claimed for materials and compliance problems that may have led supplies were not supported by to the questioned costs. We found that purchase orders, invoices, canceled the board of education’s staff was not checks, or expense vouchers. familiar with NSF’s grant requirements. The awardee did not track actual participant support costs in relation to NSF OIG Semiannual Report 9 March 1998 participant costs budgeted in the award We found that the overall cost of documents. An awardee’s ability to the project was below the amount track participant support costs is originally budgeted. However, even important because NSF-provided funds though the overall project cost declined, for participant support may not be used the association requested increased by the awardee for other categories of funding from NSF. NSF’s program expenses without the specific prior director and grants officer approved the approval of the cognizant NSF program supplemental funding without officer. In addition, the awardee paid recognizing that in so doing the subcontract costs based on budgeted association’s cost sharing commitment amounts rather than actual costs. would be reduced. Shrinking Program Budget We audited the budget and Results in Reduced Funding for recalculated the awardees’ cost sharing commitment based on the original share Nonprofit Association promised of 56 percent. As a result, we recommended that NSF reduce the A nonprofit association was amount of the award by $294,095. The awarded over $1.1 million to develop a funds recovered can be made available multimedia project that conveys stories to support other programs. of successful environmental efforts at the grassroots level and shows how NSF management is reviewing those efforts can be replicated our recommendations. elsewhere. The association created a three-part television program broadcast in September 1997 and an educational CD-ROM. The association originally agreed to share 56 percent of the project’s cost. NSF OIG Semiannual Report 10 March 1998 Summary of Other Significant Audits of NSF Awards Before conducting an audit, we usually perform preaudit surveys. The preaudit survey is a limited review of an institution’s accounting system and grant expenditures to determine whether further auditing is required. Based on the results of our preaudit surveys, we may conduct a full financial audit or an audit that focuses on specific cost categories. Questioned costs can result both from audits and preaudit surveys. Education Awards During this reporting period, we completed seven audits and two surveys covering education awards totaling more than $10.8 million. The institutions audited were primarily school districts with no recent NSF audit coverage. The audits identified a total of $544,257 in direct costs and $157,685 of amounts claimed as cost sharing that were questioned. In addition, they identified $2,193,095 of cost sharing commitments that may not be satisfied by the institutions. Two of the audits had significant findings: • A northwestern school district charged $285,309 for personnel compensation costs that were questioned because they were not adequately supported by time and attendance records. • An audit of a southwestern school district disclosed $88,336 that had been budgeted as participant support costs that were spent in other cost categories without prior NSF approval. Research Awards During this semiannual period, we also completed 14 preaudit surveys, 7 of which resulted in audits, covering 46 research awards totaling approximately $36 mil- lion. The organizations we reviewed were primarily small research institutions that had limited experience administering federal awards, and they had no recent NSF audit coverage. Most of the surveys conducted during this semiannual period did not yield significant questioned costs or identify serious compliance issues. Four of the audits and three of the surveys conducted this period yielded total questioned costs of $193,262 for indirect costs in excess of the amount allowed; costs incurred after the expiration of the award without the prior approval of appropriate NSF officials; and unsupported consultant fees, participant support costs, equipment, and supplies. Three of the audits disclosed more significant findings, which are summarized below. NSF OIG Semiannual Report 11 March 1998 • An audit of a southwestern nonprofit organization identified questioned costs of $103,123 for preaward costs incurred more than 90 days prior to the start of the award, indirect costs not included in the award budget, unsupported costs, duplicate costs, and costs that were not allocable to the award. The audit also identified several compliance issues including at risk cost sharing. • An audit of a northeastern, nonprofit educational organization yielded questioned costs of $109,887. Costs for leasehold improvements, legal fees related to a reorganization, and duplicate costs and consultant costs in excess of the NSF daily allowable rate were questioned because they were unallowable under the applicable federal cost principles. We also questioned certain indirect costs charged to the award because they were not approved by NSF, and we questioned costs that were incurred more than 90 days prior to the start of the award without the approval of an appropriate NSF official. • An audit of a Midwestern nonprofit hospital yielded questioned costs of $237,060. The majority of these costs were for a subcontract with a Canadian university that was not approved by NSF and for which there was no subcontract agreement. We also questioned unsupported salaries and benefits and indirect costs charged to the award because they were not approved by NSF. The audit also identified several compliance issues. Peer Review of Another Office of Inspector General The Inspector General Act of We reviewed the system of 1978, as amended, requires that the quality control for the audit function of audit function of OIGs must be peer the National Railroad Passenger reviewed by a federal audit entity. This Corporation’s Office of the Inspector peer review is required to ensure that General (AMTRAK OIG) for the year OIGs are in compliance with auditing ended March 31, 1997. We found that standards established by the Comp- the system of quality control for the troller General of the United States. audit function of AMTRAK OIG was These standards require that audit designed in accordance with the quality organizations establish an appropriate standards established by the President’s system of internal quality control and Council on Integrity and Efficiency. undergo an external quality control review of that system at least once While there were no significant every 3 years. findings, NSF OIG made three minor recommendations for improving the quality control system: (1) to retain copies of external quality control review reports, (2) to ensure working papers are prepared in accordance with NSF OIG Semiannual Report 12 March 1998 AMTRAK OIG policy and procedures the AMTRAK OIG’s monitoring of and with government standards, and financial statement audits. (3) to establish written procedures for The AMTRAK OIG agreed with these recommendations. Audit Resolutions Underpayment of Wages to amount of back wages and interest from Contract Employees the contractor and subcontractor. In Semiannual Report Preaward Audit Analysis of Two Number 15 (page 21), we reported that Proposals Results in Significant a contractor and its subcontractor, who Savings provided the staffing for NSF’s mailroom, printing, and warehouse In Semiannual Report operations, were suspected of not Number 17 (page 9), we reported that complying with the minimum wage our preaward audit analysis of a standards outlined in the “Wage proposal for funding of supercomputer Determination” section of the Service centers identified $8 million in potential Contract Act of 1965, as amended. We savings. These estimates were informed NSF management, and it associated with avoidance of sales tax referred the apparent violations to the payments on equipment purchases U.S. Department of Labor, which has ($5 million), limiting annual salary jurisdiction for formal investigation and increases ($2 million), and negotiating a adjudication. subcontractor’s fee ($1 million). During 1997, we conducted a NSF concurred with our follow-up review with the Department recommendation to avoid sales tax of Labor related to the audit of the NSF payments on equipment purchases contractor. The Department of Labor which, because of the reduced amount agreed that an underpayment liability budgeted for equipment, will save under the NSF contract had occurred $3.7 million. The award budget did not and asked our assistance in calculating provide funding increases for future the amount owed to the employees. periods. Therefore, any annual salary The Department of Labor requested that increases requested will be negotiated the contractor and its subcontractor pay by the agency in future years. The the employees back wages in accor- supercomputer center negotiated the dance with the amounts outlined in the subcontractor’s fee prior to submitting wage determination. As a result of this the proposal to NSF. However, upon review, we determined that contractor expiration of this arrangement (in and subcontractor employees had been 2 years) NSF will review the underpaid by $51,120. We worked subcontractor’s fee. closely with NSF management to ensure that the employees received the correct NSF OIG Semiannual Report 13 March 1998 Use of Temporary Scientists and Engineers In Semiannual Report Num- ber 17, we evaluated the costs of two programs that NSF uses for employing temporary scientists: the Intergovern- mental Personnel Act (IPA) Mobility Program and the Program for Visiting Scientists, Engineers, and Educators (VSEE). We recommended certain cost controls. In this reporting period, NSF management modified its process for determining IPA salaries, and NSF implemented two new requirements. NSF decided that (1) senior manage- ment must concur with the hiring of any IPAs whose salary exceeds the normal rate of pay for a position at NSF and (2) the Deputy Director must concur with the hiring of any IPA whose salary exceeds the level of pay for a senior federal executive (level 6 of the pay scale for the Senior Executive Service). Management also implemented additional controls to ensure that IPA assignments are temporary by limiting them to a maximum of 6 years during a 10-year period. NSF OIG Semiannual Report 14 March 1998 Investigations The Investigations section is responsible for investi- gating 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 prosecution or civil litigation, or to NSF’s Office of the Director for administrative resolution. Investigative Highlights Coordinating Our Investigative Efforts 16 Cases Involving Improper Use of NSF Funds 17 Update on Continuing Investigations of NSF SBIR Awardees 21 Other Investigative Matters 23 Statistical Data 53 NSF OIG Semiannual Report 15 March 1998 Coordinating Our Investigative Efforts Over the last 5 years, we identified instances when NSF funds awarded to academic and research institutions were diverted from their intended purposes. In other instances, we identified small businesses that made false statements and omitted material information in documents to secure NSF funding through the Small Business Innovation Research (SBIR) program. We obtained efficient and effective resolutions in cases when we coordinated our investigative efforts with other organizations. In cases involving SBIR awards, we found that companies engaged in fraudulent activity tend to do so concurrently against several agencies that support SBIR programs. By coordinating our investigation of SBIR award recipients with other agencies, we conserve federal investigative resources while developing effective working relation- ships. In some instances, agencies alerted us to fraud that might affect NSF and have invited us to initiate or participate in an investigation. In other instances, we identified possible fraudulent activities that do not directly implicate NSF and referred relevant information to the cognizant law enforcement authority. During this reporting period, we combined our investigative efforts with those of other affected agencies to uncover evidence that a company may have received substantial duplicate funding from several federal agencies under the SBIR program. In previous and current investigations, we worked with agents from other federal agencies in identifying companies that secured SBIR awards through a pattern of false statements and material omissions in their research proposals, progress reports, and final reports. Prior semiannual reports detailed SBIR investigations by our office that resulted in three criminal convictions, three civil settlements, and investigative recoveries exceeding $6 million. During this semiannual period, one case resulted in a criminal conviction. We continue to work with the Department of Justice (DOJ) and other law enforcement offices to resolve four other SBIR cases. Outside of the SBIR arena, we often work closely with grantee academic and research institutions to coordinate investigations regarding allegations of financial improprieties involving NSF funds and programs at those institutions. University internal auditors, for example, assist us by explaining their university’s accounting and records systems as well as policies and procedures. They also have internal sources of information that can provide key investigative leads. We believe grantee institutions also benefit from our coordinated investigations. The grantee can use jointly obtained evidence to support prompt and appropriate administrative action to stop improper activities while state or federal authorities decide whether criminal prosecution or civil litigation is warranted. In a number of cases, university internal auditors have used evidence gathered during the coordinated investigations to support their own recommendations to their university. Auditors’ recommendations based on coordinated investigations have supported administrative NSF OIG Semiannual Report 16 March 1998 actions ranging from suspension of a subject’s signature authority over university funds to placement of the subject on administrative leave or termination of the subject’s employment. In those cases where we successfully coordinated our investigative efforts with grantees, but concluded that criminal prosecution or civil action was unwarranted, we often allow the institution to resolve any outstanding administrative issues. Several of our coordinated investigations are detailed in this report. Cases Involving Improper Use of NSF 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 purpose is a criminal act that can be prosecuted under several statutes. We encourage universities and other grantees to notify NSF of any significant problems related to the misuse of NSF funds. Early notification of significant problems increases our ability to investigate allegations and take corrective action to protect NSF and its grantees. University Professor Indicted for Our joint investigation revealed Theft and Abuse of Official evidence that the professor had used university funds and resources for his Capacity personal gain. In February and March 1998, based on this joint investigation, We worked jointly with the a state grand jury brought three separate Federal Bureau of Investigation (FBI), felony indictments against the the Defense Criminal Investigative professor. One of the indictments Service, state and federal prosecutorial charged the professor with Theft for authorities, and university internal appropriating property of another that auditors in investigating allegations came into his custody and possession involving a professor at a southwestern through his position as a public servant. state university. The professor, who Two of the indictments stated that, as was the PI on NSF awards as well as an employee of the state university research awards from other federal, system and therefore a public servant, state, and private grant-making entities, he misused government money that was also the owner of two private came into his custody and possession by companies. One of the professor’s virtue of that employment. These two companies had submitted proposals to, indictments charged the professor with and obtained federal research awards Abuse of Official Capacity for using from, the SBIR program administered state government money for personal by various federal agencies, including gain. NSF and the Department of Defense (DOD). NSF OIG Semiannual Report 17 March 1998 An indictment charges that the state agency awarded $235,588 to the professor intentionally and knowingly university with the professor as PI. We misused government money for his found that no matching support was personal gain to pay expenses for: ever provided by the professor’s (1) printing promotional fliers for company. The university and state courses he sponsored through a personal agency determined that the professor’s business; (2) textbooks for those failure to disclose his interest in the courses; and (3) airline flights, hotel company was material to the award accommodations, meals, and ground process and canceled the grant. transportation related to the courses. Another indictment charges that the The university also found that professor intentionally and knowingly the professor had used university misused government money for his resources for activities related to his personal gain to pay travel expenses personal companies. When required to related to the operation of the designate an account to be charged for professor’s other small business, which the use of these resources, the professor had secured SBIR funding from the charged many of the associated costs to federal government. research accounts, including an account for an NSF grant on which the In a separate outgrowth of our professor was a co-PI. The university investigation, DOD proposed that the found that the professor had wrongfully professor and his SBIR company be charged the NSF grant $100,349. The suspended from eligibility for federal total amount of the NSF award was grants and contracts, and suspended a $318,304, and the university provided pending $750,000 Phase II SBIR award $308,191 in cost sharing for this to the company. That procurement was project. The university returned canceled during this period, and the $100,349 to the project to fund funds were used for an SBIR contract to continued research by the other PIs. another small business. The university removed the professor as co-PI on this NSF award, and it Our coordinated investigation replaced the professor as PI on another with the university led to a deter- NSF award, which totaled $323,730. mination that the professor had failed to On another NSF award that expired disclose his outside business interests to during the investigation the university the university as required by university returned $60,582 of unspent funds. regulations, and he had made affir- The university also placed the professor mative statements to conceal these on administrative leave and restricted business interests. In one instance, in a his signature authority to charge proposal to the university and a state expenses to university accounts. funding agency, the professor stated that a company had pledged to provide $170,000 in matching industrial support for the project; however, he did not disclose that he was the owner of that company. Based on this proposal, the NSF OIG Semiannual Report 18 March 1998 Administrative Assistant Agrees agreement, which mandated 18 months to Pretrial Diversion for of supervised probation, 200 hours of community service, and counseling as Embezzlement directed by Pretrial Services. If the assistant successfully completes the In a case involving an supervised probation, the charges will investigation we coordinated with a be dropped. west coast university, we determined that the director of an NSF-funded In the course of this inves- biology project “loaned” $6,000 to her tigation, we also identified questionable administrative assistant from an entertainment expenses the admini- unauthorized private bank account strative assistant and the director had created specifically to manage program charged to the NSF grant. The income generated by the NSF grant. university agreed to credit the NSF The administrative assistant also grant account for approximately $7,360 subsequently wrote four checks to of these charges. During the inves- herself from the account, totaling tigation, the director resigned from the $11,600, and forged the director’s university and the university terminated signature on the checks. During the the employment of the administrative investigation, the administrative assistant. assistant repaid the university the $17,600 she had received from the project income account, plus an Conditions Placed on Future additional $1,000 which she described NSF Funding for a Northeast as “interest.” The administrative Nonprofit assistant admitted, in a sworn statement to OIG agents, that she signed the We received allegations that a director’s name on the checks without small science center in the northeast had authorization, and that she used the misused NSF funds from a grant that money to pay for work being done on was to provide an environmental her house. She also stated that she had science program for teachers. The always intended to repay the money, center, a nonprofit organization offering plus interest. We referred the matter to educational programs in science, the cognizant U.S. Attorney’s Office. previously received a number of awards to develop and disseminate science In November 1997, the U.S. education materials to teachers in Attorney’s Office filed a criminal secondary schools. While we found complaint charging the administrative evidence that the organization produced assistant with violating 18 U.S.C. the program that it proposed, and § 666, Theft or Bribery Concerning identified no specific examples of Programs Receiving Federal Funds. misuse, we also found evidence that the Subsequently, the U.S. Attorney’s institution was financially unstable and Office and the administrative assistant that financial records had not been agreed to resolve the case by having the adequately maintained. assistant enter a pretrial diversion NSF OIG Semiannual Report 19 March 1998 Because the science center has no current federal awards but had previously received over $1 million from NSF, we recommended that NSF take action to ensure that further funding is not provided to the science center or any other organization operated by its current director unless the organization can demonstrate that it has an adequate system for maintaining financial records that comply with applicable federal regulations. NSF agreed with our suggestion and immediately took steps to implement it. NSF Funds Reprogrammed After Jury Verdict An FBI investigation of an NSF- funded scientist resulted in his being found guilty by a U.S. District Court jury of extortion and fraud. Based on the FBI investigation, we began an inquiry into the scientist’s use of NSF grant funds. Our inquiry led the scientist’s university to voluntarily suspend a newly awarded NSF biology grant that named the scientist as PI. Following the jury verdict, NSF and the university agreed to cancel the 3-year continuing grant, allowing NSF to reprogram the $345,000 awarded. After the scientist is sentenced, we will recommend that, based on the fraud conviction, NSF debar the scientist for 3 years from receiving federal grants and contracts. NSF OIG Semiannual Report 20 March 1998 Update on Continuing Investigations of NSF SBIR Awardees As previously stated, we evidence that the company may have continue to coordinate SBIR inves- submitted similar or identical proposals tigative efforts with other agencies and to several different federal agencies are currently conducting several joint without disclosing prior submissions, as investigations of companies that receive required in the solicitations, even funds from NSF’s SBIR program. The though this action rendered the following significant actions involving proposals and accompanying certi- SBIR cases occurred during this fications false or misleading. We reporting period: referred this matter to the U.S. Attorney’s Office, which is now • During a review of an east coast coordinating a joint investigation that company that had received NSF SBIR includes all involved federal agencies. funding, we found evidence that the During this reporting period, the U.S. company had received awards from the Attorney’s Office sent a letter to the Department of Education (DoEd) and company notifying it of the investi- the National Institutes of Health for gation and asking for the company’s identical projects by making mis- response to allegations that it had statements and omissions in the wrongfully applied for and received proposals and signing false or mis- duplicate awards. leading certifications. Because the fraud did not involve NSF awards, we • NSF, and several other agencies that referred the matter to the DoEd OIG for award SBIR grants and contracts, investigation. In February 1998, the received allegations that a company was company’s president, who was the PI misusing SBIR funds by receiving on the duplicate awards, pled guilty to duplicate awards and by subcontracting one count of violating the mail fraud work on SBIR awards to other com- statute, 18 U.S.C. § 1341, Fraud and panies owned by its president. We Swindles, for submitting false and coordinated the investigative efforts of fraudulent documents through the mail all the agencies that had made SBIR in order to receive identical SBIR awards to this company. Our initial awards. The company president is to review found evidence to support the be sentenced later this year. allegations and we referred this matter to the cognizant U.S. Attorney’s • During a review of a company that Office. We and the U.S. Attorney’s had received several NSF SBIR awards, Office are now coordinating this multi- we found evidence that the company agency investigation. may have received duplicate awards from NSF and DOD. DOD inves- • A civil complaint seeking $298,854 tigators joined our review of this in damages and penalties was filed by company’s SBIR awards and we found the cognizant U.S. Attorney’s Office, NSF OIG Semiannual Report 21 March 1998 charging violations of 31 U.S.C. technical report as having been obtained § 3729, False Claims Act, alleging that for the NSF award. In fact, the data a west coast company had submitted were obtained before the NSF SBIR similar or identical proposals to award was made for another, unrelated, different federal agencies without federally funded project conducted by disclosing the prior submissions, as and at the university. The company no required. As a result of these mis- longer submits proposals through the leading submissions, the company SBIR program; therefore, we are received a $49,618 SBIR award from working with the cognizant U.S. NSF after receiving a $49,983 SBIR Attorney’s Office, which is negotiating contract for the same project from a civil settlement to resolve this matter. another federal agency. Based on the evidence supporting the civil complaint, • We found evidence that a company NSF suspended the company and the had placed a graphic image of the NSF company’s president, who was the sole logo on its website along with the PI on all SBIR proposals by the words “A National Science Foundation company, from participating in federal SBIR Site,” without NSF’s authori- grants and contracts. zation or knowledge. This company had never received funding from NSF. • In our investigation of a Midwest It received the logo from another entity, company, we found evidence that the which had been given the graphic image company had submitted false claims to under an NSF contract. We were receive $50,000 of NSF SBIR grant concerned about the unauthorized use of funds. The company president was the NSF logo and the words “A ineligible to be the PI on the NSF SBIR National Science Foundation SBIR award because he was a full-time Site,” because it implied a close employee at a university during most of affiliation between the company and the SBIR award period. In addition, NSF. Based on our investigation, the the company, acting through its company removed the NSF logo and the president, who was also the PI on the words “A National Science Foundation award, presented data in the SBIR final SBIR Site” from its website. NSF OIG Semiannual Report 22 March 1998 Other Investigative Matters Conflicts of Interests In Semiannual Report Number 17, we mentioned that we referred two conflict- of-interests investigations to DOJ. The conflict matter involving honoraria payments remains pending at DOJ. The conflict matter involving stock ownership was declined by DOJ. Our investigation in that matter found evidence that an NSF program officer had failed to recuse himself from acting on proposals submitted by a company after he purchased stock in the company, despite being advised to do so by NSF’s Designated Agency Ethics Official. After receiving advice from the Designated Agency Ethics Official, the program officer improperly participated in the review process by recommending the declination of two proposals submitted by the company and by summarizing panel reviews for a third proposal, which was also declined. Participation of any kind (including declination) is a violation of federal conflict-of-interests laws and regulations. During this report period, NSF suspended the program officer for 14 days. Anti-Spam Legislation Needed “Spam” is a term applied to widely disseminated, unsolicited electronic mail. The quantity of spam has increased dramatically in recent years, wasting both recipients’ time and Internet resources. We reviewed the status of the law after receiving complaints from NSF staff who had received spam at their NSF electronic mail addresses. We determined that current law affords no effective means of taking action against this practice, unless the spam constitutes fraud or other wrongdoing. Two bills pending in the Senate would allow users of the Internet to avoid spam and would allow legal action to be taken against the senders of spam in certain circum- stances. The enactment of either bill into law would enable federal agencies, such as NSF, to protect agency resources against the ever-increasing onslaught of unsolicited electronic mail. NSF OIG Semiannual Report 23 March 1998 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 50,500 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 evalu- ations; 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. The Office’s scientists and engineers engage in outreach activities to acquaint NSF’s staff with misconduct in science policies, inspections, and with OIG activities in general. Oversight Highlights Misconduct in Science • Partnership With Universities 26 • Plagiarism Case Sent to the Office of the Director 27 • Three Decisions by the Office of the Director 28 • Cases Involving Citation Errors 31 Examination of Merit Review 33 Inspections • Statewide Systemic Initiative 37 • Bioscience Organization 39 Statistical Data 54 NSF OIG Semiannual Report 25 March 1998 Misconduct in Science and Engineering Partnership With Universities in the Referral Process Our practice of referring allegations of misconduct in science to awardee institutions for investigation is guided by NSF’s misconduct in science regulation that affirms “awardee institutions bear primary responsibility for prevention and detection of misconduct” (45 C.F.R. §689.3(a)). This practice permits awardee institutions to take responsibility for activities on their campuses and provides us with the relevant scientific community’s assessment of whether a subject’s actions are considered serious. As explained in Semiannual Number 12 (page 26), we refer cases to awardees for investigation after we, or the awardee, conduct an inquiry to determine whether the allegation requires investigation. A referral allows each partner to perform its role. When an awardee institution accepts the referral of an allegation, we delay our own investigation, pending the receipt of the institution’s investigation report. We review an awardee institution’s report to determine if it is accurate and complete and if usual and reasonable procedures were followed. We determine whether we can use it instead of initiating our own independent investigation. The balance that is maintained between the partners permits each to take actions it considers appropriate and necessary. Although we both share responsibility for the integrity of the scientific community, an awardee institution takes action within its community and NSF takes action within the federal context. We reviewed our closed cases to develop a quantitative assessment of the frequency with which we refer cases and the effectiveness of our referral process. We determined that, from our office’s inception in 1989 until September 30, 1997, awardee institutions conducted 88 percent of our completed investigations. We were unable to refer a few of these inves- tigations to awardee institutions because we were notified of the matter after they had completed their efforts. The remaining 12 percent were investigated by our office alone because the institution’s size, the location of the individual, or the nature of the allegation precluded an impartial evaluation of the allegations by the institution. We considered 61 percent of the investigations conducted by awardee institutions to have met our criteria, and accepted the institution’s investigation reports as our own, often after contacting the awardee institution to request clarification or supplementary information. The remaining 39 percent of awardee investigations required further investigation by our office. Our investigative efforts were principally to develop more evidence about intent, seriousness, or a pattern of behavior uniquely important in support of our recommended actions to NSF management. Of all the investigations conducted by awardee institutions, we considered only 10 percent to be unacceptable, requiring that we conduct our own review. Our practice of referring cases to awardee institutions has routinely provided our office with information upon which we have relied when making our own recommendations. NSF OIG Semiannual Report 26 March 1998 Although we frequently supplement these reports with additional information, we have rarely been required to conduct an entirely new review. We believe that the referral process strengthens our partnership with awardee institutions and the scientific community. It ensures that our recommendations are grounded in the relevant scientific community’s assessment of its members’ actions and not in a process dissociated from the community served by NSF. Case Leading to Investigative Report Sent to the Office of the Director Plagiarism From Three subject’s proposal to evaluate the signi- Published Papers ficance and seriousness of the duplication between the two documents. During his We received an allegation that the evaluation, the expert noticed that a figure president of a small business (the subject) in the proposal was an unattributed plagiarized from a previously published reproduction of a figure from a third paper paper (paper 1) into his proposal submitted and that most of that figure’s caption was to NSF’s SBIR program. It was alleged also copied. Our expert reported that most that the subject’s proposal was based on the of the verbatim duplication between the same basic research ideas put forth in proposal and paper 1 occurred in the paper 1 and that it relied significantly on section of the proposal containing the the theory and the application of that theory scientific and technical justification for as developed in paper 1. We determined using this specific approach to the problem. that the subject’s proposal contained The expert said that the volume of copied extensive, verbatim text, a figure, material was substantial and that the references, and formulas identical to those proposal made use of the scientific research in paper 1, but without attributing or ideas originally presented in paper 1. We distinguishing the copied material from considered the subject’s verbatim use of material original to the proposal. We also this material from paper 1 more serious determined that the subject’s proposal because he incorporated almost all of the contained verbatim text without attributing text that presented and justified the original or distinguishing it from a second, ideas in paper 1 into his proposal. published paper (paper 2). Although the subject included citations We wrote to the subject three times in his proposal to papers 1 and 2, these and telephoned him once asking for an citations did not adequately convey to the explanation for the similarity of his reader that he used ideas, verbatim text, proposal to the published papers. We did formulas, references, and a figure from not receive a substantive response. For this paper 1 and verbatim text from paper 2 in reason, we took the unusual step of his proposal. Our expert said that in key proceeding without input from the subject. places, proper attribution was not given and it was not clear to the reader that much of We asked an expert in the proposal’s the background discussion came from field of science to compare paper 1 and the paper 1. The expert considered the non- NSF OIG Semiannual Report 27 March 1998 attribution significant and serious. We We believe that a preponderance of the concluded that a preponderance of the evidence supports the conclusion that the evidence supported the conclusion that the subject acted knowingly when he subject copied substantial material from plagiarized material from three source three published papers and used scientific documents with the intention of deceiving research ideas from paper 1 in his proposal. NSF’s reviewers and Program Director into believing that these were his ideas, and that It is inconceivable that the subject he had the expertise and knowledge to could have inadvertently copied such a complete the project. large quantity and variety of material without acting intentionally. He copied We recommended that NSF conclude extensive material from three published that the subject committed misconduct in papers and, in particular, two figures from science and take three actions to protect the two different published papers were federal government’s interest. First, NSF xerographically reproduced and included in should send a letter of reprimand to the his proposal without any citation or subject informing him that NSF has made a acknowledgment. In light of the fact that finding of misconduct in science against the subject did provide some citations to him. Second, for 3 years from the final source documents within the proposal, disposition of this case, NSF should require including some properly referenced figures, the subject to obtain certification, signed by it is not probable that the subject forgot to himself and co-signed by the PI or manager provide the appropriate references and to of any federally sponsored research, that distinguish the copied text from his own. any documents the subject prepares in The subject demonstrated a selective use of connection with the research project contain citations, not a lack of knowledge about no plagiarism. Third, NSF should exclude how to use them. the subject from participating as an NSF reviewer, advisor, or consultant for 3 years from the final disposition of this case. Decisions by the Office of the Director Agreement to Voluntary Exclusion into allegations that he had committed Settles Case of Obstruction of misconduct in science. In this reporting period, the professor entered into a binding Agency Proceedings agreement with NSF to resolve the debarment proceeding and misconduct-in- As reported in Semiannual Report science allegation. Although denying Number 17 (page 43), at our wrongdoing, the professor acknowledged recommendation, NSF issued a notice that there was sufficient evidence proposing to debar a university professor from receiving federal funds for his having to permit a fact finder to conclude submitted and vouched for the authenticity that he submitted falsified evidence of false evidence during an investigation for the purpose of disproving the NSF OIG Semiannual Report 28 March 1998 misconduct in science charge being professor] from receiving Federal funds investigated by the OIG, that [he] and the university’s inability to arrange for knew that the evidence was an appropriate substitute PI.” falsified, and that [he] made false statements under oath in the OIG Postdoctoral Researcher investigation concerning the Falsified Data authenticity of the evidence. In Semiannual Report Number 17 The professor accordingly withdrew (pages 39-40), we discussed the case of an his request for a fact-finding hearing, and NSF-supported postdoctoral researcher who voluntarily excluded himself from receiving falsified data from a commercial firm’s any funds from, serving as a PI on, or analysis. We recommended that NSF’s having supervisory responsibility, sub- Acting Deputy Director find the subject stantive control or critical influence over, committed misconduct in science and awards from any federal agency for 2 years impose certification and assurance following the date of the agreement. He requirements in the event the subject also voluntarily excluded himself for the associated himself with an NSF-supported same period from serving as a merit project. NSF’s Acting Deputy Director reviewer, panelist, or member of a sent the subject a letter of reprimand that Committee of Visitors for NSF. In turn, concluded he committed misconduct in NSF agreed not to issue a finding of science. He required for the next 3 years misconduct in science against the professor that the subject submit, in connection with or to make further referrals to federal or any NSF-supported publication or state prosecutorial authorities based upon submission to NSF, a certification to OIG the facts in the administrative record. that to the best of his knowledge, his documents contain no false data and no NSF also agreed to fund a pending hypotheses or conclusions based upon proposal by his university on which the falsified data. He also required that the professor had originally been named as PI, subject ensure that an appropriate conditioned on his replacement as PI and supervisory official provide an assurance his exclusion from supervisory or that, to the best of his or her knowledge, management control over the research. the subject’s work associated with any This agreement tracked the terms of NSF’s NSF-supported publication or submission to debarment regulation, 45 C.F.R. Part 620, NSF does not contain falsified data and which contemplates that persons debarred presents neither hypotheses nor conclusions or voluntarily excluded from financial based upon falsified data. assistance and benefits under federal programs and activities may not have Use of Paraphrased Text “primary management or supervisory responsibilities” or have “critical influence in an NSF Proposal on or substantive control” over a covered transaction during the period of debarment In Semiannual Report Number 15 or voluntary exclusion. However, the (page 40), we described a case of a PI university ultimately withdrew the proposal whose failure to cite text paraphrased from “due to the voluntary exclusion of [the a source document had given rise to an NSF OIG Semiannual Report 29 March 1998 allegation of misconduct in science. We On Appeal, NSF Upholds deferred the case to the institution whose Misconduct Decision Investigation Committee did not view the subject’s copying as plagiarism. The In Semiannual Report Number 17, Committee determined that the subject had we discussed NSF’s Acting Deputy not committed misconduct in science. We Director’s decision to debar for 2 years a regarded the Committee’s view of scientist who plagiarized text from a review plagiarism as too narrow because it did not article and an NSF proposal. The recognize that paraphrased text needed to plagiarized text appeared in four different be cited to a source document. proposals that sought funding for the same underlying research project. The subject The adjudicator, NSF’s Acting Deputy appealed this decision to NSF’s Director. Director, determined that although the The Director concluded that the admini- subject “did not adequately apprise the strative record established that the subject reader of the full extent of [his] reliance on plagiarized text into four proposals and that the . . . review article in the background he attempted to conceal his actions by section of [his] NSF proposal,” he “did not requesting that the original author not serve seriously deviate from accepted practices or as a peer reviewer of his proposal. The engage in scientific misconduct.” He Director concluded that the 2-year cautioned him debarment was warranted and observed that the University investigation committee to use great care in future NSF recommended a longer period of debar- proposals or submissions to ensure ment. He noted that the University that [he] attribute[d] full credit to investigation committee was unaware of the the original author and that [he] full extent of the subject’s plagiarism offset verbatim or paraphrased text (which we discovered during our and include[d] citations to the subsequent investigation). source document. NSF OIG Semiannual Report 30 March 1998 Misconduct Cases Involving Citation Errors in NSF Proposals PIs cite papers and manuscripts in journal. The co-author relayed comments NSF proposals to reference work and to attributed to the member to the subject. show their accomplishments under prior The subject incorrectly interpreted these NSF-supported projects. This information comments to mean that, pending some needs to be prepared carefully so the PIs’ revisions, the manuscript would be proposed research can be evaluated and published in the second journal. The compared with competing proposals fairly subject then began incorrectly citing it as by everyone involved in the review “submitted” to, and then as “accepted” by, process. We closed three cases this period the second journal in his NSF proposals. in which inconsistent, incomplete, and Later, the subject learned that the society inaccurate citations for papers and member had not read the manuscript. Once manuscripts gave rise to allegations of he had, he said it was not ready for misrepresentations in NSF proposals. publication. The co-authors then revised the manuscript and submitted it to the third In the first case, it was alleged that journal, in which it was published. The the subject, in three successively submitted subject said that his actions were “honest NSF proposals, misrepresented facts about error[s],” but that he had also been “naive the submission and publication of a co- and incorrect.” We considered the authored manuscript. In his first proposal, subject’s actions to be a bad practice, but the subject stated in two separate sections not sufficiently serious to initiate an that the manuscript was either submitted to investigation. We concluded that no one journal or to a second journal. In three further action was required in this case separate sections of his second proposal, because (1) he is aware, through our the subject cited the manuscript as exchanges, that his incorrect claims about “accepted” by the second journal and his manuscript were a bad practice and do included the date of acceptance by the not meet the community’s expectations for journal in two of these sections. In the high scholarship and (2) the subject’s third proposal, the subject listed the accurate citation for the manuscript in his manuscript as “accepted” by the second progress report for the award had corrected journal. In his most recent progress report NSF’s record. for his award (from the first proposal), he stated that the manuscript had been In the second case, a reviewer published in yet a third journal. alleged that the subject misrepresented information in his proposal because he We learned from the subject that the failed to cite a manuscript that discussed manuscript had been submitted to, but the results of the proposed project. We rejected by, the first journal. The subject’s learned that the subject had submitted four co-author had then submitted a revised proposals on the same idea over a 3-year manuscript for comment to a member of a period. The first three proposals were scientific society that publishes the second declined (the third was the focus of this NSF OIG Semiannual Report 31 March 1998 inquiry) and the fourth was funded. authors discussed their uncertainty in using According to the subject, there were two the species name in the title and deferred separate manuscripts describing a pilot any final decision on its correctness until project; the second was a revision of the they had more information. We concluded first. He explained that the earlier the title changes were consistent with the manuscript had been rejected by the editor subject’s attempt to clarify his position in shortly before he submitted his third the debate. Further, the changes had not proposal and that the later manuscript was introduced a significant error in the record submitted after NSF received it. He said or misinterpreted his research. We con- he should have clarified the status of the cluded that the subject’s changes were a project and the relationship of the careless way of providing information in an manuscripts to it in his proposal. We NSF proposal; however, they were not, in concluded that the reviewer’s concerns this case, sufficiently serious to pursue. could have been avoided if this explanation had been included in the third proposal. These examples demonstrate the importance of careful preparation of In the third case, a reviewer alleged proposals. The Grant Proposal Guide that the subject had misrepresented the instructs applicants to prepare their titles of two co-authored papers and a co- proposals with “strict adherence to the rules authored manuscript in two separate of proper scholarship and attribution” sections of his NSF proposal by changing (NSF 98-2). If the subjects in these three the species name of an organism in those cases had carefully checked the information titles. For the two papers, we confirmed provided in their proposals prior to that the journals had not been officially submission, the interpretations that led to notified of any corrections. We learned the allegations of misconduct in science that the correct speciation of the organism could have been avoided. has been the focus of an ongoing scientific disagreement. In one of the papers, the NSF OIG Semiannual Report 32 March 1998 Examination of Merit-Review System The Senate Committee on Com- While there are both statutory and merce, Science, and Transportation was administrative priorities regarding par- concerned about the possibility of NSF ticular programs, such as K-12 science awards being given out in circumvention of education, global climate change, or polar merit review. At the Committee’s request, programs, these are not specific to we sought to identify any discretionary individual institutions. The only exceptions spending programs that have no formal we found were in report language accom- merit-based criteria established or that have panying FYs 1994 and 1995 NSF appro- criteria that are not being properly applied. priations that provided funds to review We determined NSF’s merit-review system NSF’s research centers. However, these uses reasonable and impartial criteria that allocations appear to have been directed at are fairly applied throughout NSF’s administrative issues rather than substantive programs. scientific research. All NSF awards are merit reviewed, Our findings are consistent with either through the peer-review system, those of reviews conducted by the General which solicits opinions from experts outside Accounting Office, an external Proposal the Foundation, or through internal review Review Advisory Team, and a joint NSF by NSF program officials. Awards made and National Science Board Task Force on without outside peer-review are restricted Merit Review. We concluded that formal primarily to special classes of proposals, merit-based review criteria exist to guide such as workshops, conferences, and Small all of NSF’s funding decisions, and that the Grants for Exploratory Research. We applicable criteria are appropriately applied examined awards for FY 1997 that were to these funding decisions. We did not made without outside peer-review and identify any NSF programs or awards for determined that the waivers of outside peer which such criteria were absent or review were reasonable and consistent with improperly applied. NSF guidelines. NSF OIG Semiannual Report 33 March 1998 Other Oversight Activities We describe aspects of four cases we closed this period in which concerns were raised about NSF’s management decisions. In the first case, our efforts resulted in an improvement in an NSF program, and in the remaining cases, our review of NSF programmatic and managerial decisions concluded that NSF had proceeded properly. Database user alleges PM refused to acknowledge the university’s “invasion of privacy” misrepresentation. The complainant was not listed as a PI or co-PI on the proposal, NSF maintains an Internet but was to provide technical support. The accessible database system that contains complaint was concerned that possible information on academic science and misrepresentations in NSF records were engineering resources. A complainant damaging to his professional reputation and accurately informed us that new users could sought information from us. We deter- not access the database without providing mined the complainant’s request for information, such as their names and e-mail information about the site visit was more addresses, that the complainant considered appropriately handled as a Privacy Act an invasion of privacy. Most of the user- request and forwarded it to NSF’s Privacy entered information was stored so that each Act Officer, who informed the complainant future use did not require re-entering all of that the only information about him in the the originally requested information. proposal was a copy of his vitae and offered it to him. The program manager (PM) responsible for the database explained that Unsatisfied with this response, the the requested information allowed NSF to complainant alleged to OIG that NSF was statistically determine the percentage of engaged in a “cover-up” because it would users from academia, the government, or not provide him the information he sought. the private sector. The PM said he was He said he was concerned with “things not concerned about any negative impression in the proposal” that should have been in users might have about providing the record, and thus alleged the PM was identifying information and said he would not being honest about his description of change the requirement that users enter the site visit. The complainant also alleged their names and e-mail addresses to an that the PM had spoken with the media option. We confirmed that he had about the project. The complainant asked implemented this change and that users may OIG to investigate his allegations. The now access the database anonymously. complainant provided no evidence to support his allegations, but did provide us NSF’s alleged “cover-up” with the names of individuals who participated in the site visit. The complainant alleged to OIG that his university had misrepresented his We interviewed these people and the abilities during an NSF site visit in PM and found no written or oral evidence connection with a proposal, and that the that anyone from the site visit team acted NSF OIG Semiannual Report 34 March 1998 inappropriately, that NSF has any records Unacceptable Remarks about the complainant it has not offered in an ad hoc Review him, or that anyone from the complainant’s university misrepresented his abilities to One case caused us to consider NSF’s site visit team. NSF’s practices for handling inappropriate remarks made by reviewers—considerations PI’s Replacement we have periodically addressed. NSF of Project Personnel management informed us that a PI, whose proposal had been declined, expressed As part of a larger case, a com- concern about a PM’s use of one ad hoc plainant alleged that her removal as director review. We reviewed the matter to of an effort that was supported by a determine if the PM had handled the ad hoc supplement to a PI’s larger NSF award review appropriately. The review violated NSF’s Grant General Conditions contained prejudicial language about the (GC-1). The institutional officials to whom PI’s and his students’ ethnic group. The PI she appealed supported the PI’s decision. said the PM should not have used this We learned the NSF award jacket contained biased review. The PI acknowledged, a message from the PI documenting the however, that the PM had written on the decision to replace the complainant. The copy of the verbatim review that the complainant sought our assistance after she paragraph with the prejudicial language spoke with NSF staff requesting their “was not considered when making the intervention; NSF staff had concluded that decision.” The PI subsequently contacted her removal did not require NSF approval. the PM, who explained she had not considered the prejudicial remarks in The GC-1 stipulates that although a making her funding decision. grantee can seek NSF’s advice, the grantee is responsible for the administration of an NSF’s Proposal and Award Manual award. Seeking NSF’s advice does not (PAM) explains that a PI should receive shift the responsibility for operating verbatim copies of all reviews except those decisions to NSF. The GC-1 specifies only determined to be unacceptable. Unaccep- that NSF must be notified and approve of table reviews are not to be used in the the unusual absence of, or a change in, PI; evaluation of the proposal. According to it does not require NSF approval for the the PAM, verbatim copies of all reviews removal of other project personnel, such as used to make a decision must be sent to the the complainant. We concluded that the PI PI after deleting information that could was within his authority to replace the identify the reviewer and, in rare instances, complainant and his decision was supported other information that is necessary to by the institution. The terms of the GC-1 protect certain other rights and interests. had not been violated by the PI’s decision and NSF had acted appropriately. NSF OIG Semiannual Report 35 March 1998 We are aware that NSF PMs use We concluded that, however dis- one of the following approaches when tressful such discriminatory remarks are, dealing with inappropriate remarks in the PM’s actions were consistent with reviews. They (1) consider the review NSF’s requirements. Her decision to unacceptable and don’t use it at all, or decline this proposal was consistent with (2) use the review and include a note to the her program’s goals and objectives and was PI explaining that the inappropriate remarks not influenced by the inflammatory were not considered. remarks. Oversight Staff Activities • Two OIG scientists participated in a Conference on Managing Integrity in Research co- sponsored by the Public Health Service’s Office of Research Integrity and the Office of the Vice President for Research at the University of Michigan in Ann Arbor. • At NSF, OIG scientists and Japanese scientists from the National Center for Science Information Systems in Tokyo and from the JIKEI University School of Medicine in Tokyo discussed how NSF handles allegations of misconduct in science and engineering and how public information on findings of misconduct in science can be made readily accessible with Japanese scientists. • At the annual meeting of the Association for Practical and Professional Ethics in Dallas, TX, the Assistant Inspector General for Oversight moderated a small group discussion of the keynote address, “Ethical Systems and Public Policy: The National Bioethics Advisory Commission Experience.” NSF OIG Semiannual Report 36 March 1998 Inspections Our office conducts external and internal inspections. External inspections are on-site reviews at grantee 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 conducted by multidisciplinary review teams that may include scientists, engineers, auditors, computer specialists, investigators, lawyers, and management/program analysts. We completed two external inspections during this reporting period, which were conducted at a public school system in the South and at a private, non-profit biological laboratory in the Mid-Atlantic region. We did not conduct any internal inspections during this period. External Inspections We designed our external inspections program to improve our understanding of NSF’s grantee activities by integrating financial, administrative, and program analyses in a single review. We view external inspections as an effective approach because they allow us to determine whether NSF’s program goals are being achieved as well as review the financial and administrative management of NSF awards. Inspection teams look for early indications of financial, administrative, or compliance problems so they can be addressed before they become so serious that their resolution requires an audit or investigation. We have been closely following the development of NSF's GPRA Strategic Plan for FY 1997-2003 and in particular, the GPRA performance measures included in the FY 1999 Performance Plan NSF sent to OMB to accompany its FY 1999 budget. Although we expect internal inspections to play a larger role than external inspections in our monitoring of NSF’s GPRA compliance, our external inspections will examine the capacity of NSF's grantees to supply information relevant to NSF's GPRA performance measures. Inspection of a Statewide Systemic administer a project aimed at reforming the Initiative in the South state’s education system. Supporting projects such as this is one of NSF’s key We also discussed two questioned investment strategies toward its goal, cost audits of systemic inititative awards stated in its GPRA Strategic Plan, of in this report. See page 8. “promot[ing] broad-based or system-wide reform in science, mathematics, engineer- This inspection was based on a ing and technology education that is based cooperative agreement made by NSF’s on national standards.” Directorate for Education and Human Resources (EHR) with a state agency to NSF OIG Semiannual Report 37 March 1998 We found that project and NSF NSF had no way to realize that funds were officials shared a commitment to results actually being carried over in the subcon- oriented management as envisioned in tractors’ cash reserve. GPRA. They sought to use student achievement data to measure results and To make a reasonable assessment of help them focus and improve their efforts. past performance and future budget needs, We learned that, despite this commitment, NSF needs accurate information about what the project’s capacity to generate and funds have and have not been expended by analyze results data was widely viewed as the state agency’s regional partnership needing improvement. subcontractors. Accordingly, we recom- mended that the state agency report any Reporting to NSF carry-over funds maintained by the subawardees with an explanation of the NSF receives ample programmatic reasons if the funds exceed 10 percent of information about the state agency’s the year’s budget. The state agency agreed project, enabling NSF to monitor the that this information was useful for NSF project effectively. However, the state and promised to include it in future reports. agency's reports did not supply necessary financial information, including some Monitoring Subawardees information that would have helped NSF evaluate programmatic performance. The A major focus of our review was cooperative agreement requires the state the state agency’s management of its agency to annually report an estimate of subawards to institutions across the state to carry-over funds with an explanation of the engage in educational reform activities. As reasons if the funds exceed 10 percent of of August 31, 1997, the state agency spent the year’s budget. In the fourth year, the 80 percent of costs claimed for the state agency reported that of the $2.4 mil- cooperative agreement ($6.6 million) on lion it had received that year, there would regional partnership subcontracts and other be no carry-over funds at the end of the subawards. We were especially interested fourth year. However, we found that the in how the state agency monitored the state agency’s five regional partnership activities of the project’s five regional subcontractors had carried $362,582 partners, which together received about (15 percent of the fourth-year funding) over half of the funds from NSF’s award. In to the fifth year. our visits to two of the regional partner- ships and our interviews at the state The state agency did not report agency, we found that project managers at carry-over funds maintained by the the state agency were intimately familiar subcontractors primarily because the state with programmatic activities in the regions agency recorded cash advance payments to and that communication between the state subcontractors as actual incurred costs. agency and its regional partners was When the state agency claimed these cash excellent. advance payments as incurred cooperative agreement costs, NSF believed that the subcontractors had already used those funds to support educational reform activities. NSF OIG Semiannual Report 38 March 1998 Our financial review found that the unallowable expenditures. We recom- state agency’s cash management procedures mended that in future subawards the state for its subawardees needed improvement. agency include a provision requiring com- The state agency typically provided pliance with NSF and federal regulations, subawardees a large portion of their funds and the state agency agreed to do so. at the beginning of each subaward period based on long-term budget projections. Inspection at Private Nonprofit NSF’s Grants Policy Manual (GPM) and Bioscience Organization OMB Circular A-110 require that grantees and subawardees make actual disbursements This inspection was based on nine in a minimum amount of time after the grants made by NSF's Directorate for transfer of federal funds. We do not Biological Sciences. Over the 7 years believe that the one-time cash advances to spanned by these grants, NSF provided subawardees for an entire subaward period approximately $2.7 million in funding. In meet federal cash management require- 1996, NSF provided about 18 percent of ments. When subawardees have unspent the federal funding to this institution. Five federal funds at or near the end of a of the grants were made by NSF's Living subaward period, they may spend these Stocks Collections program to support the funds in unauthorized or inefficient ways various collections of biological materials rather than choose to return unspent funds maintained by the organization and its to the state agency. Accordingly, we efforts to distribute and preserve recommended that the state agency authenticated specimens. The remaining implement appropriate cash management four awards supported basic research. standards for its subawardees. The state agency agreed to implement procedures At the time of our inspection, this whereby subawardees will submit requests 73-year old organization was in major for payments based on their calculations of transition. It is relocating, aligning itself immediate cash needs. with an academic institution, emphasizing the importance of an internal basic research As required by the cooperative effort, developing new databases for the agreement, the state agency had written storage and retrieval of information about agreements with each of the five regional its specimens, and changing its production partners. These agreements were generally and distribution practices. It is anticipated well prepared and included detailed that the relocation will cause a large turn- provisions regarding the state agency’s over in personnel. One of the three expectations of its subcontractors. How- buildings it currently occupies was pur- ever, we noted that these agreements did chased, in part, with NSF funding. At our not include a provision requiring suggestion, the organization agreed to compliance with NSF and federal regu- coordinate the sale of that building with lations. This type of provision would be NSF. helpful in alerting subawardees to their obligations. When, as at a subawardee we visited, personnel are not familiar with NSF and federal regulations, the risk increases that the awardee will incur NSF OIG Semiannual Report 39 March 1998 We found that this organization provides valuable services to the biological community. In terms of potential NSF GPRA results, the organization's efforts can be expressed as outputs and outcomes. It can measure how many samples it supplied for scientific research as well as how many times it responds to information requests from the scientific community. It can monitor the influence of the specimens, services, and information it provides on new discoveries and on subsequent directions taken by research efforts. With the exception of the organization's misconduct in science policy and its laboratory records retention policy, we concluded that its policies and practices were consistent with NSF's expectations. The organization is modifying its current policies to incorporate many of our recom- mendations. We also concluded that the administration and management of these awards generally met NSF's standards. We learned that no formal subcontract existed in one of several awards that contained large subcontracts. We recommended that such a document be executed. We also learned that the NSF-approved budget for two of the grants in this inspection per- mitted the organization to charge some of the expenses of advisory committee meetings as direct costs that allowed it to recover the associated indirect costs. NSF has clarified that such meeting costs may be charged to NSF grants, but only as par- ticipant support, which does not permit indirect cost recovery. We recommended that the organization and NSF consider the best way to implement these budgetary changes. NSF OIG Semiannual Report 40 March 1998 Statistical Data Audit Reports Issued With Recommendations for Better Use of Funds 42 Audit Reports Issued With Questioned Costs 43 Additional Performance Measures 44 Audit Reports Involving Cost-Sharing Shortfalls 45 Status of Systemic Recommendations That Involve Internal NSF Management 46 List of Reports 48 Audit Reports With Outstanding Management Decisions 51 Investigative Activity and Statistics 53 Misconduct Case Activity and Assurances/Certifications Received 54 NSF OIG Semiannual Report 41 March 1998 Audit Reports Issued With Recommendations for Better Use of Funds Dollar Value A. For which no management decision has been made by the commencement of the reporting period 104,885,996 B. Recommendations that were issued during the reporting period (these were issued in 6 reports) 22,689,440 C. Adjustment resulting from resolution process 0 Subtotal of A+B+C 127,575,436 D. For which a management decision was made during the reporting period 39,822,080 (i) dollar value of recommendations that were agreed to by management based on proposed management action 8,160,129 based on proposed legislative action 0 (ii) dollar value of recommendations that were not agreed to by management 32,416,951 E. For which no management decision had been made by the end of the reporting period 86,998,356* For which no management decision was made within 6 months of issuance 65,141,945* *Of this amount, $60 million is related to funds collected for the registration of domain names. These funds are the subject of litigation in Federal District Court. NSF OIG Semiannual Report 42 March 1998 Audit Reports Issued With Questioned Costs Questioned Unsupported Number Costs Costs A. For which no management decision has been made by the commencement of the reporting 65 8,532,906 3,126,932 period B. That were issued during the reporting period 31 5,744,711 2,692,595 C. Adjustments to questioned costs resulting from resolution activities 0 0 0 Subtotal of A+B+C 96 14,277,617 5,819,527 D. For which a management decision was made during the reporting period 53 3,109,108 872,503 (i) dollar value of disallowed costs N/A 1,286,459 N/A (ii) dollar value of costs not disallowed N/A 1,822,649 N/A E. For which no management decision had been made by the end of the reporting period 43 11,168,509 4,947,024 For which no management decision was made within 6 months of issuance 21 5,497,942 2,254,429 NSF OIG Semiannual Report 43 March 1998 Additional Performance Measures As required by the Inspector General Act of 1978, we provide tables in each Semiannual Report to the Congress that give statistical information on work conducted by our audit and investigation units. Tables that provide statistics concerning these required performance measures are on pages 53 and 54. GAO and OMB suggested that Offices of Inspector General develop additional performance measures that provide information about their activities. As a result, we developed two additional performance measures to provide additional insights about the work of our office. The two additional measures are “Cost Sharing Shortfalls” and “Systemic Recommendations.” COST-SHARING SHORTFALLS—NSF seeks to leverage its resources by acting as a catalyst, promoting partnerships, and, in some cases, obligating grantees to contribute substantial nonfederal resources to a project. When NSF award documents require substantial cost sharing, we seek to determine whether grantees are in fact providing promised resources from nonfederal sources. We divide cost-sharing shortfalls into two categories. Shortfalls occurring during the life of a project indicate that the grantee may not be able to provide all promised resources from nonfederal sources before completing the project. Shortfalls that remain when a project is complete demonstrate that a grantee has in fact not met cost-sharing obligations; these findings result in formal questioned costs. The table on page 45 provides statistical information about shortfalls occurring during the course of a project and at the completion of the project. Auditors who conduct financial statement audits at grantee organizations may identify a general deficiency concerning cost sharing (which we classify as a “compliance finding”) but often do not identify the amount of a cost-sharing shortfall (which we classify as a “monetary finding”) because it is not material in the context of the organization’s overall financial statement presentation. We track both monetary and compliance findings that involve cost sharing. SYSTEMIC RECOMMENDATIONS—OIG staff members regularly review NSF’s internal operations. These reviews often result in systemic recommendations that are designed to improve the economy and efficiency of NSF operations. We routinely track these systemic recommendations and report to NSF’s Director and Deputy Director quarterly about the status of our recommendations. The table on page 46 provides statistical information about the status of all systemic recommendations that involve NSF’s internal operations. NSF OIG Semiannual Report 44 March 1998 Audit Reports Involving Cost-Sharing Shortfalls At Risk of Cost-Sharing Cost-Sharing Shortfalls at Number Cost Sharing Shortfall/ Completion of Reports Promised (Ongoing of the Project) Project* A. For which no management decision has been made by the beginning of the reporting period 1. Reports with monetary findings 19 60,886,936 30,481,530 408,070 2. Reports with compliance findings 7 N/A N/A N/A B. That were issued during the reporting period 1. Reports with monetary findings 10 13,833,241 11,557,912 182,165 2. Reports with compliance findings 1 N/A N/A N/A Total of Reports With Cost-Sharing Findings (A1+A2+B1+B2) 37 74,720,177 42,039,442 590,235 C. For which a management decision was made during the reporting period 1. Dollar value of cost-sharing shortfall that grantee agrees to provide 12 28,980,608 17,217,736 263,721 2. Dollar value of cost-sharing shortfall that management waives 2 0 12,799 58,417 3. Compliance recommendations with which management agreed 8 N/A N/A N/A 4. Compliance recommendation with which management disagreed 0 N/A N/A N/A D. For which no management decision has been made by the end of the reporting period 1. Reports with monetary findings 17 45,739,569 24,808,907 268,097 2. Reports with compliance findings 0 N/A N/A N/A *These findings result in questioned costs and are also identified in our table on questioned costs on page 43. NSF OIG Semiannual Report 45 March 1998 Status of Systemic Recommendations That Involve Internal NSF Management Open Recommendations Recommendations Open at the Beginning of the Reporting Period 47 New Recommendations Made During Reporting Period 30 Total Recommendations to be Addressed 77 Management Resolution1 of Recommendations Recommendations Awaiting Management Resolution 11 Recommendations Resolved by Management 66 Management Agrees to Take Responsive Action 63 Management Decides No Action is Required 3 Final Action2 on OIG Recommendations Final Action Completed 40 Recommendations Open at End of Period 37 Aging of Open Recommendations Awaiting Management Resolution: 0 through 6 Months 11 7 through 12 Months 0 more than 12 Months 0 Awaiting Final Action After Resolution 0 through 6 Months 15 7 through 12 Months 4 13 through 18 Months 5 19 through 24 Months 0 more than 24 Months 2 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. NSF OIG Semiannual Report 46 March 1998 Status of Systemic Recommendations That Involve Internal NSF Management 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 Issue Review of NSFNET Audit of Infrastructure Account Review of NSF’s Property Management System Responsibilities of Property Custodians NSF OIG Semiannual Report 47 March 1998 List of Reports NSF and CPA Performed Reviews Report Subject Questioned Unsupported Better Use Cost Number Costs Costs of Funds* Sharing At-Risk 98-1001 Atmospheric Research Group 9,100 0 0 0 98-1002 Small Company 0 0 78,029 0 98-1003 School District 285,309 285,309 0 510,310 98-1004 City School System 225,938 111,039 0 0 98-1005 Zoological Society 66,512 64,502 0 2,362 98-1006 City Board of Education 2,071,176 1,671,623 0 366,611 98-1007 City School System 96,944 31,282 0 1,682,785 98-1008 Science Museum 5,534 0 87,000 0 98-1009 Research and Instrument Company 3,037 0 0 0 98-1010 Small Company 25,365 0 0 0 98-1011 Southwest College 35,167 0 0 0 98-1012 Telecommunications Company 31,327 5,126 0 0 98-1013 City School District 41,222 0 0 0 98-1014 Public Television Station 0 0 294,095 0 98-1015 School 103,123 66,294 0 7,700 98-1016 School 109,887 15,010 0 0 98-1017 City School System 104,658 68,780 538,816 0 98-1018 Small Company 705,125 20,000 0 8,987,733 98-1019 State Department of Education 1,099,207 292,927 0 0 98-1020 Hospital Organization 237,060 60,703 0 411 98-1021 Traineeship Program 259,556 0 0 0 98-1023 County School District 0 0 0 0 98-2001 Office of Polar Programs 0 0 20,936,500 0 98-2002 NSF’s FY 97 Financial Statements 0 0 0 0 NSF OIG Semiannual Report 48 March 1998 List of Reports NSF and CPA Performed Reviews Report Subject Questioned Unsupported Better Use Cost Number Costs Costs of Funds* Sharing At-Risk 98-2003 NSF—Administrative Cost Recoveries 0 0 755,000 0 98-2004 NSF—Draft FY 97 Management Letter Report 0 0 0 0 98-6001 National Engineering Center 60,613 0 0 0 98-6002 Research Foundation 3,368 0 0 0 98-6003 City Public School System 0 0 0 0 98-6004 Science Center 0 0 0 0 98-6005 Association 3,040 0 0 0 Total 5,582,268 2,692,595 22,689,440 11,557,912 _________________________ * Over 5 years. NSF OIG Semiannual Report 49 March 1998 List of Reports NSF-Cognizant Reports Cost Report Questioned Unsupported Sharing Number Subject Costs Costs At-Risk 98-4009 Research Company 25,650 0 0 98-4011 Telecommunications 65,695 0 0 Institute Total 91,345 0 0 Other Federal Audits Report Questioned Unsupported Number Subject Costs Costs 98-5012 School Foundation 13,569 0 98-5018 Northeast University 936 0 98-5072 Southwest University 6,654 0 98-5075 Botanical Garden 16,738 0 98-5101 Southwest University 1,437 0 98-5104 Midwest College 31,200 0 98-5121 Institute 564 0 Total 71,098 0 NSF OIG Semiannual Report 50 March 1998 Audit Reports With Outstanding Management Decisions This section identifies audit reports involving questioned costs, funds put to better use, and cost sharing at risk 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 21 audit reports with questioned costs, 5 reports with recommendations for funds to be put to better use, and 4 items involving cost sharing at risk. The status of systemic recommendations that involve internal NSF management are described on page 46. Report Date Report Dollar Number Title Issued Value Status Items Involving Questioned Costs 95-5722 State Government 09/22/95 113,204 1 96-1002 State Department of Administration 10/01/95 181,459 1 96-1003 State Education Agency and University 11/14/95 514,268 1 96-1014 Educational Research Association 03/20/96 211,879 1 96-1025 Science Museum 03/28/96 237,678 1 96-1027 For-Profit Contractor 03/28/96 828,915 1 96-1031 Learning Center 09/30/96 337,377 1 96-2113 Contract Services Provider 08/29/96 4,054 1 97-1004 Public School System 02/07/97 130,996 1 97-1010 Northeastern University 03/13/97 451,147 1 97-1012 Mathematical Society 03/18/97 341,057 1 97-1018 School District 06/02/97 173,877 1 97-1021 Public School System 08/07/97 49,455 1 97-1023 University 09/03/97 134,358 1 97-1024 School District 09/03/97 52,151 1 97-1025 School District 09/04/97 345,937 1 97-1027 School District 09/17/97 133,478 1 97-1028 School for Science and Mathematics 09/19/97 251,639 1 97-1031 Research Corporation 09/30/97 314,690 1 97-1032 Communications Company 09/30/97 49,194 1 97-2105 Review of FFRDC 03/31/97 641,129 1 NSF OIG Semiannual Report 51 March 1998 Audit Reports With Outstanding Management Decisions Report Date Report Dollar Number Title Issued Value Status Items Involving Funds Put to Better Use 97-2107 Review of Funding for Development of the Internet 03/31/97 60,000,000 3 97-1031 Research Corporation 09/30/97 2,341,945 3 97-2115 Research Center 09/15/97 2,800,000 3 Items Involving Cost Sharing at Risk 97-1021 Public School System 08/07/97 292,352 2 97-1024 School District 09/03/97 822,279 2 97-1025 School District 09/04/97 11,511,738 2 97-1027 School District 09/17/97 624,626 2 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 before resolution. NSF OIG Semiannual Report 52 March 1998 Investigative Activity and Statistics Investigative Activity Active Cases From Previous Reporting Period 49 New Allegations 14 Total Cases 63 Cases Closed After Preliminary Assessments 0 Cases Closed After Inquiry/Investigation 22 Total Cases Closed 22 Active Cases 41 Investigative Statistics New Referral 2 Referrals From Previous Reporting Period 14 Prosecutorial Declinations 1 Indictments (including criminal complaints) 4 Criminal Convictions/Pleas 0 Civil Settlements 1 Administrative Actions 1 Investigative Recoveries* $1,338,675 *Investigative recoveries comprise civil penalties and criminal fines and restitutions as well as specific cost savings for the government. NSF OIG Semiannual Report 53 March 1998 Misconduct Case Activity and Assurances/Certifications Received Misconduct Case Activity FY 1997 FY 1998 Last Half First Half Active Cases From Prior Period 58 48 Received During Period 17 33 Closed Out During Period 27 23 In-Process at End of Period 48 58 Cases Forwarded to the Office of the Director During Period for Adjudication 4 1 Cases Reported in Prior Periods With No Adjudication by the Office of the Director 1* 3** *This case is described in Semiannual Report Number 15, pages 40 through 41. **These cases are described in Semiannual Report Number 17, pages 36 through 41. During this reporting period, we closed 23 cases, 21 of them at the inquiry stage. These cases included allegations of plagiarism (verbatim and/or intellectual theft), violations of the confidentiality of peer review, failure to share samples, misrepresentations of research efforts, abuse of the mentor relationship, or human subjects violations. Many of these cases contained multiple allegations of misconduct in science. After reviewing information available to us from NSF or other sources, we found it necessary to obtain additional information from the subjects in nine of these cases. Assurances and Certifications Received* Number of Cases Requiring Assurances at End of Period 1 Number of Cases Requiring Certifications at End of Period 1 Assurances Received During This Period 0 Certifications Received During This Period 0 *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. NSF OIG Semiannual Report 54 March 1998 Glossary Funds to be Put to Better Use Funds the Office of Inspector General has identified in an audit recommendation that could be used more efficiently by reducing outlays, deobligating funds, avoiding unnecessary expenditures, or taking other efficiency measures. NSF’s Definition of Misconduct in Science and Engineering Fabrication, falsification, plagiarism, or other serious deviation from accepted practices in proposing, carrying out, or reporting results from activities funded by NSF; or retaliation of any kind against a person who reported or provided information about suspected or alleged misconduct and who has not acted in bad faith. Questioned Cost A cost resulting from an alleged violation of law, regulation, or the terms and conditions of the grant, cooperative agreement, or other document governing the expenditure of funds. A cost can also be “questioned” because it is not supported by adequate documentation or because funds have been used for a purpose that appears to be unnecessary or unreasonable. NSF OIG Semiannual Report 55 March 1998 Prepared by Office of Inspector General National Science Foundation For more information write Office of Inspector General National Science Foundation 4201 Wilson Boulevard Arlington, VA 22230 call (703) 306-2100 or visit our web site www.nsf.gov/cgi-bin/getpub?oigmarch1998 Electronic Mail Hotline firstname.lastname@example.org
Semiannual Report - March 1998
Published by the National Science Foundation, Office of Inspector General on 1998-03-01.
Below is a raw (and likely hideous) rendition of the original report. (PDF)