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)

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

                                            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
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
                        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
                                                         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
costs. NSF management will resolve
these issues during the audit resolution
                                                         We identified material com-
                                                 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

        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

        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
                                                     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
                                                   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
NSF and the Department of Defense

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
                                                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 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
                                        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

                • 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
       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

                                             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

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
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

         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

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
   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

   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

   “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.
   “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

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

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
  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

                     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
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

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      National Science Foundation
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