oversight

Semiannual Report - March 1999

Published by the National Science Foundation, Office of Inspector General on 1999-03-01.

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

Semiannual
Report
to the
Congress



    IG
National Science Foundation
MARCH 1999
                        MISSI N
    To work together with the agency and its programs so that their
goals are achieved efficiently, and to detect and deter wrongdoing.




                          VISI N
    Although organizationally and operationally independent, we
are part of the Foundation and choose to be inclusive.

    We participate fully in the Foundation’s efforts to be flexible
and innovative while operating efficiently and with integrity.

    We support the Foundation’s mission of enabling discovery
and education, and we recommend change in proportion to need
and foreseeable benefit.




                          G ALS
    Focus on substantive matters and focus our audits and
inspections prospectively.

    Develop fair, accurate, and timely products.

     Create partnerships that enable our customers to achieve
their goals.




                     As established in August 1998
Letter to the Congress of the United States
       In my view, the National Science Foundation’s Office of Inspector General can and should
exercise its independent responsibilities to promote efficiency and integrity in a manner that is
inclusive, flexible and innovative, and keeps issues in proportion to their significance. To do
so, we must create partnerships, focus on substance, and develop fair and timely products.
Our strategic plan for accomplishing these goals is described on pages i and ii of this report
and is available in full on the World Wide Web ( www.nsf.gov/cgi-bin/getpub?oignov98 ).

       Our new strategic emphasis on partnerships is fostering an environment that facili-
tates continuous improvement for our Office and for NSF. For example, by working
through a newly created Audit Coordination Committee, NSF management routinely made
adjustments to the agency’s financial statements as issues were identified by our auditors,
and NSF has already begun to implement corrective action in response to the one report-
able condition we identified in our audit. Because of the collaborative work of the staffs of
the Inspector General and the Chief Financial Officer, we were able for the first time to
issue an unqualified opinion on all material aspects of the agency’s financial statements
( page 2 ).


       In the letter accompanying our last Semiannual Report, I explained our belief that NSF is
best served by having an Office of Inspector General tailored to its mission and culture. When
forwarding the Semiannual Report to the Congress, the Chair of the National Science Board
described the Board’s support for “a vigorous and independent Office of the Inspector General
within the National Science Foundation.” We continue to believe that consolidation of our
Office with another Office of Inspector General should not be a part of any legislative effort to
improve the efficacy of the Inspector General Act.


        This Semiannual Report describes the specific reviews we conducted in the areas of
efficiency ( page 1 ) and integrity ( page 15 ). We also describe systemic recommendations
for improvement that resulted from combined integrity and efficiency reviews ( page 23 ).
These combined reviews will become more prevalent in the future.


       We look forward to ongoing, collaborative dialogue with our partners and contin-
ued evolution for our partnering activities as we learn how to function optimally as part of
NSF and how to participate fully in NSF’s efforts to be flexible and innovative while
operating efficiently and with integrity.



                                  Respectfully submitted,




                                  Philip L. Sunshine
                                  Acting Inspector General
                                  April 30, 1999
IMPLEMENTING OUR STRATEGIC PLAN
         In our previous Semiannual Report to the Congress, we described our vision for our
Office of Inspector General. In this reporting period, we continued the process of creating an
OIG that is inclusive, flexible, and innovative, and keeps issues in proportion. We worked
with NSF management and the National Science Board's Committee on Audit and Oversight to
design our first Strategic Plan. Our Strategic Plan, which we finalized and posted on the
World Wide Web (www.nsf.gov/cgi-bin/getpub?oignov98) in this period, is designed to
complement NSF's Strategic Plan and enhance our work's positive effect on NSF's activities
and programs. Our Plan describes the philosophy guiding our efficiency and integrity
activities and our commitment to produce timely, high quality products that are useful to our
customers and stakeholders. The plan articulates our core values of honesty, accuracy,
timeliness, innovation, flexibility, cooperation, fairness, and goodwill, which are integral to
our decision-making processes. Our Strategic Plan defines three common goals for our
efficiency and integrity efforts: focusing on substance; developing fair, accurate, and timely
products; and creating partnerships.

Strategies

        The Strategic Plan discusses specific strategies for achieving our goals in the context of
particular efficiency and integrity reviews. We focus on substantive issues by concentrating
our efforts on those that involve the greatest risk to NSF. We conduct limited surveys to
assess the importance of particular issues involving economy and efficiency, and we encourage
the use of proactive reviews to identify potential problems and propose solutions. We
emphasize integrity issues in which action is necessary to protect the government’s interests.
When investigating wrongdoing, we seek to balance our efforts by protecting the privacy of
those involved. We also seek to alleviate the burdens our efforts can create for others.

        In developing fair, accurate, and timely products, we rely on verifiable documented
evidence and use oral testimony as a secondary source of information. We identify and
integrate the necessary disciplinary expertise to ensure the timely delivery of all of our office’s
products; a balanced presentation of the administrative, scientific, financial, and legal aspects
of the matter; and, over time, a consistent application of rules and expectations.

        By implementing the practice of sharing our efficiency findings with management
during the course of our efforts, we have been able to facilitate early corrective action. We
also engage in outreach activities to facilitate constructive dialogue with our customers and
stakeholders about our products and identify issues for which our assistance would be most
useful.




                                                 i
Implementing New Outreach Activities
        Our staff members are now assigned as liaisons to each major component of the
agency. Our liaison staff meet regularly with division directors to discuss efficiency and
integrity matters. In response to a suggestion, we began providing briefings on the contents of
our Semiannual Report as a way of facilitating these relationships. This effort reinforced our
view that partnerships can provide fresh, important perspectives. We continue to work closely
with program officials in assessing the seriousness of integrity matters and in developing
reasonable recommendations during efficiency reviews. NSF staff have sought our advice on
matters about which they are concerned and have asked us to consider new review activities.
We have coordinated our activities with NSF officials to a much greater extent than before and
believe the results of the efficiency and integrity reviews described in this report reflect this
coordination.

         When planning and coordinating efficiency reviews, we worked closely with an Audit
Coordination Committee that we established in conjunction with NSF management in the last
semiannual period. With representation from NSF management and our office, the Committee
facilitates constructive discussion on all audit and audit resolution issues and shares information
and ideas on issues of mutual concern. The Committee’s efforts have facilitated clear and open
dialogue designed to promote effective and timely resolution of our audits and outstanding
audit resolution issues. This report contains detailed descriptions of efficiency reviews that
have benefited from the activities of this Committee.

        We have reemphasized the value of seeking expert advice and guidance from NSF’s
scientific staff in our integrity efforts. NSF staff have continually provided us with excellent
technical guidance and analysis on particular cases and have assisted our understanding of the
norms and culture of the particular segment of the scientific community involved in a matter.
These interactions between our staff and NSF staff have helped foster the partnerships we are
building in a structured way through our outreach program.

         In this period, we also met with staff in half of the agency's divisions to describe our
mission, vision, and goals, and to seek feedback and suggestions about our activities. We
participated for the first time in one of NSF's Regional Grants Conferences, and we have been
invited to participate in several upcoming conferences to discuss our efficiency and integrity
efforts.

Cultural Improvement

        We are encouraged by the progress NSF and our staff have made in establishing a
culture that views partnerships and inclusion as essential elements in the development of fair
and reasonable solutions to matters under review. By operating within this constructive
environment, we can continue to make measurable progress toward achieving strategic goals
for our office and for NSF.




                                                ii
CONTENTS



   Efficiency          1



   Integrity          15



   Statistical Data   31



   Glossary           43
ACRONYMS
ACC    Audit Coordination Committee
CFO    Chief Financial Officer
DCIS   Defense Criminal Investigative Service
DoD    Department of Defense
FBI    Federal Bureau of Investigation
DOJ    Department of Justice
GRT    Graduate Research Traineeship
GSA    General Services Administration
HHS    Department of Health and Human Services
JKP    Japan and Korea Program
NASA   National Aeronautics and Space Administration
OMB    Office of Management and Budget
OPM    Office of Personnel Management
OPP    Office of Polar Programs
SBIR   Small Business Innovation Research
SPSE   South Pole Safety and Environmental
SPSM   South Pole Station Modernization
STTR   Small Business Technology Transfer
USAP   U.S. Antarctic Program
VTR    Vendor Training Request
Y2K    Year 2000
REPORTING REQUIREMENTS
   Under the Inspector General Act, we report to Congress every 6 months
      about what we have been doing. In particular, we must discuss:




Reports issued, significant problems identified, the value of
questioned costs and recommendations that funds be put to
                                                                           1, 31
better use, and NSF’s decision in response (or, if none, an
explanation of why and a desired timetable for such a
decision)

Matters referred to prosecutors, and the resulting                     15, 41
prosecutions and convictions

With regard to previously reported recommendations:
significant management decisions that were revised, and
                                                                      39, 42
significant recommendations for which NSF has not
completed its response

Legislation and regulations that may affect the efficiency or      Not Applicable
integrity of NSF’s programs                                         This Period

Whether we disagree with any significant decision by NSF           None to Report
management                                                          This Period


Any matter in which the agency unreasonably refused to             None to Report
provide us with information or assistance                           This Period
                       Efficiency

       B
                y   conducting audits and inspections, we review agency
                  operations as well as grants, contracts, and cooperative
                  agreements    funded     by   NSF.    We     conduct    financial
                  audits to determine whether costs claimed by awardees are
allowable, reasonable, and properly allocated. Our audits also seek to identify
practices that may be modified so that funds can be used for other purposes
that our customers consider more important. We are also responsible for
auditing NSF’s financial statements, including evaluations of internal controls
and data processing systems.


       Inspections are multi-disciplinary reviews of financial, administrative,
and programmatic operations that identify problems and also highlight what
works well. Our inspections program is designed to assist managers at NSF
and funded organizations improve operations and better achieve research and
education goals.


                            HIGHLIGHTS

      NSF Receives First Unqualified Audit Opinion on its Financial Statements         2
      Audit Coordination Committee                                                    3
      Reviews Involving Facilities and Research Centers                                5
      Polar Program Reviews                                                           6
      Audits Involving Education and Human Resources Awards                            9
      Issues Involving Research Project Support                                       11
      Statistical Tables                                                              31

                                           1
       NSF's portfolio of investments are distributed across four key program functions:
Administration and Management, Research Facilities, Education and Training, and Research
Project Support. Our efficiency reviews cover these functions and significant reviews are
described below.


Issues Involving
Administration and Management
NSF Receives First Unqualified Audit Opinion on its Financial Statements

        We completed our audit of NSF’s agency-wide financial statements for FY 1998, in
accordance with the Chief Financial Officers (CFO) and Government Management Reform
Acts. In our opinion, NSF’s balance sheet and related statements of net cost, changes in net
position, budgeting resources, and financing were fairly presented, in all material respects, as
of September 30, 1998. This is NSF’s first unqualified audit opinion.

        Our tests of compliance with laws and regulations that could have a material effect on
the financial statements, including the Federal Financial Management Improvement Act,
disclosed no instances of noncompliance. However, our consideration of NSF’s internal
control over financial reporting identified one reportable condition concerning property, plant,
and equipment used in the U.S. Antarctic Program (USAP).

        NSF, through a contractor, maintains research facilities in New Zealand and Antarctica
where over 95 percent of NSF's capital assets reside. We found that the USAP contractor's
accounting system did not adequately account for capital project or equipment costs. We
recommended that NSF require the contractor to implement a system that properly and
consistently values and classifies buildings, construction in progress, and capital projects as
well as records the full costs of both real property and equipment in the proper accounting
period.

        NSF management agreed to require that its current contractor implement our
recommendations, and we jointly reviewed the actions the contractor proposed for
implementing these recommendations. Since NSF is currently recompeting its contract for
managing the Antarctic Program beginning in FY 2000, we also worked with NSF
management to ensure that NSF’s request for proposals will require that any new contractor
develop a system for inventory management and property accounting and control that is
consistent with our audit recommendations.




NSF OIG Semiannual Report                       2                                  March 1999
Audit Coordination Committee

        The recently established Audit Coordination Committee (ACC) played a valuable
consulting role to both the Inspector General and the CFO in the preparation and audit of the
FY 1998 financial statements. For example, during the current year audit, we determined that
the property records held by the USAP’s contractor did not document the value of a significant
number of the property items. To address this problem, the ACC coordinated the procurement
of a contractor’s services to appraise the value of those items. In addition, by working through
the ACC, a team of our auditors arranged to travel with NSF officials to New Zealand and
Antarctica to conduct a physical inventory of the property. The material adjustments resulting
from this extensive effort enabled us to substantiate the property and equipment balance
presented on NSF’s FY 1998 financial statements.

        In addition to contributing to the financial statement audit, the ACC facilitated the
discussion and resolution of recommendations on audits of awardee institutions. Discussions
among ACC members highlighted significant audit issues and important details of the reviews.
In some of the more difficult cases, further work was conducted in collaboration with NSF
staff and the awardee to develop and analyze new material presented by the awardee.

       The ACC coordinated significant refinements to NSF’s audit follow-up procedures that
were recently incorporated in NSF’s Administrative Manual. The issuance formalizes the roles
and responsibilities of the Inspector General, the CFO, and the ACC in the resolution and
implementation of audit recommendations and requires that the ACC members regularly meet
to exchange information on audit planning and the status of recommendations. This exchange
enhances our mutual understanding of programmatic intent and administrative concerns that
need to be evaluated. As a result, we expect continued improvement in the effectiveness of
our audit program and report recommendations as well as in the timely resolution of audits.

Year 2000 Readiness

        We participated in NSF’s selection of a contractor to perform an independent
verification and validation of the agency’s progress in its Year 2000 (Y2K) readiness program.
We reviewed NSF’s quarterly progress reports to the Office of Management and Budget
(OMB) and periodically met with the General Accounting Office, which is monitoring each
agency's progress in becoming Y2K compliant. At NSF’s request, we observed its
contractor’s testing of NSF’s systems to understand and assess the overall reasonableness of
the methodology and procedures used and to view the test results.

        NSF reported that all mission critical systems are now Y2K compliant. Although we
did not independently test NSF’s systems, based on our review of the work performed by the
agency’s outside contractor in verifying the agency's progress, we are satisfied that NSF has
taken all reasonable steps to ensure its systems are compliant.




NSF OIG Semiannual Report                      3                                  March 1999
Review of NSF's Vendor Training Request Process

        NSF's Division of Human Resource Management asked us to review NSF’s Vendor
Training Request (VTR) process and to determine whether NSF’s procedures and practices for
procuring training services complied with Office of Personnel Management (OPM) and General
Services Administration (GSA) guidelines. Under these guidelines, NSF established the VTR
process in October 1996 to streamline its contracting and vendor payment procedures for group
training services and to permit the training officer, rather than a contracting officer, to procure
these services.

       In general, we found that NSF’s VTR procedures and practices complied with OPM
and GSA guidance. In addition, by using the VTR process, NSF was able to reduce staff-
hours required to contract with a vendor and improve the timeliness of processing of training
requests. We identified a number of minor improvements to the VTR process, which NSF
agreed to make.

Results Act Review Plan

       We have started planning selective reviews of NSF's performance measurement system,
focusing on measures that NSF management has identified as both being important to its own
performance monitoring efforts and having the greatest risk of inaccuracy. Initially, we plan
to concentrate on verifying the reliability of quantitative data supporting the measures. These
reviews will assess the adequacy of the internal controls over the information generated by
NSF's automated information system, and will also selectively compare the automated data to
the source information in a sample of individual proposal and award files.

        Because much of the data relevant to assessing NSF's performance originates with its
awardees, we are working jointly with NSF management to develop a methodology for
assessing the accuracy of data furnished by selected awardees. In addition to quantitative
information, NSF is relying on Committees of Visitors to make qualitative judgments about
many aspects of its performance. To generate better information on the results of its awards
and to facilitate better informed performance assessments, NSF is developing and
implementing a new final project reporting system. We plan to work closely with NSF
management to help ensure that this reporting system provides credible data that are useful in
evaluating the agency’s performance.




NSF OIG Semiannual Report                       4                                   March 1999
Reviews Involving Facilities
and Research Centers
Preaward Review of a Research Facility

        We reviewed the reasonableness of a university’s 5-year budget proposal for managing
a large research facility (facility). In conjunction with this review, and at the invitation of NSF
management, we also attended the university’s panel presentation, which described the project,
and we conducted an on-site visit of the facility. As a result, we identified opportunities to
reduce the requested administrative costs associated with the project.

        We identified several issues associated with the university’s proposed overhead and
administrative rates. For example, the proposed rates included: amounts for sabbatical leave
benefits for which the majority of the facility’s employees are not eligible, costs associated
with tuition for employees’ children that are no longer allowable under OMB guidelines, costs
that were also budgeted as direct charges in the proposal, and costs that the university also
included as part of its cost-sharing commitment.

        In response to our draft report, the university submitted a revised proposal that reduced
its budget for administrative costs by $2.4 million. However, because the university did not
agree with all of our suggested budget revisions, we recommended that NSF refer the
remaining issues to the Department of Health and Human Services (HHS). As the cognizant
agency, HHS is responsible for negotiating administrative overhead rates with the university.
These negotiations could also affect the amount of administrative costs applied to two other
large NSF awards. Because HHS does not expect to complete negotiations until late in the
spring of 1999, we cannot now quantify the monetary effect on these NSF awards.

        The proposal also included annual salary increases for most facility employees that are
not consistent with the university’s proposed salary increases for other major NSF-funded
programs. NSF officials agreed to use our findings in negotiating annual salary increases for
the facility employees.

Review of Nonprofit Research Corporation

        We conducted two reviews of an NSF-funded, nonprofit research corporation. First,
we reviewed the corporation's methodologies for establishing administrative and overhead cost
recoveries to help streamline the process and identify any potential savings. Second, we
performed a vulnerability assessment of various financial operations of the corporation in an
attempt to identify any weaknesses that might have a detrimental effect on NSF-funded
projects.




NSF OIG Semiannual Report                        5                                  March 1999
        While we did not find any significant deficiencies with the corporation's cost recovery
system, we did find some opportunities for improvement. Our review identified costs that
were improperly allocated to the various cost pools, and we found that the corporation could
meet its submission deadlines by simplifying its processes and decreasing the review and
approval time period. We recommended that the rate proposal process be simplified and
formally documented. We also recommended that the corporation reconcile its proposal to its
audited financial statements to assist NSF in its review and understanding of various cost
pools.

        We did not find any major problems with the corporation's financial control over
administrative operations. However, our review identified two weaknesses associated with the
corporation's financial policies and procedures, which the corporation's management took
immediate actions to correct. The corporation’s management responded quickly because of the
close interactions between OIG, NSF personnel, and the corporation's staff, which helped
ensure that the recommendations were realistic and focused on relevant activities. We
analyzed the controls and incorporated the corporation's perspective and considerations,
without sacrificing fairness or accuracy, in developing the recommendations.

Polar Program Reviews

        Cost-Sharing Policy and Processes for Aircraft Maintenance Costs. When the
Navy provided flight operations in support of the USAP, NSF’s Office of Polar Programs
(OPP) funded all costs associated with contractor-performed aircraft maintenance because
flight operations were conducted solely to support the USAP and only NSF-owned aircraft
were used. The New York Air National Guard (Guard) now provides flight operations on
behalf of USAP. Because the Guard has other missions and operates both its own and NSF-
owned aircraft, OPP and the Guard must share the associated maintenance costs.

       Accordingly, OPP and the Guard developed a cost-sharing policy that is intended to
equitably allocate costs depending on aircraft ownership and the type of maintenance to be
performed. We reviewed the adequacy of the financial processes for implementing this cost-
sharing policy, including procedures for capturing, tracking, and reporting labor and supply
costs.

        We determined that the existing processes did not adequately support the policy. For
example, we found that OPP had not been reimbursed for some costs ($42,000) and had been
billed for maintenance work that it had not agreed to fund ($66,000). In addition, the
contractor uses some OPP-owned supplies to perform aircraft maintenance even though OPP
pays the Guard a flight hour cost, which includes funding for the supplies.

       We worked with the contractor and contract administrator to develop modified
processes to address these issues. We recommended that OPP direct the contractor and
contract administrator to implement the modified processes in order to ensure that each



NSF OIG Semiannual Report                      6                                  March 1999
organization pays its fair share of contractor-performed aircraft maintenance costs. OPP
agreed to incorporate the modified processes into its maintenance contract.

       South Pole Station Update. As described in our September 1998 Semiannual Report
(page 9), OIG staff participate in quarterly reviews of the South Pole Safety and Environmental
(SPSE) and Station Modernization (SPSM) programs. In addition, during this austral summer
season, we conducted a site visit at the South Pole.

        All design, engineering, procurement, transportation, and construction goals for the
recently ended season were met and the two projects are currently within budget. The fuel
storage component of the SPSE project is complete and the exterior shell of the garage is
complete. All needed materials and staff are on site to complete the interior of the garage this
winter. The third component of the SPSE project, the new power plant, is on schedule to
begin construction at the start of the next fiscal year. SPSM construction, currently in a pre-
construction phase, is scheduled to continue through FY 2005.

        The quarterly reviews continue to focus attention on refining the procurement,
transportation, and construction schedules for SPSE and SPSM. In response to accelerated
funding for SPSM, provided in the FY 1999 budget, the review team and the contractor
investigated the feasibility and desirability of accelerating procurement activities in order to
reduce costs and purchase systems and materials that will be consistent throughout the entire
station. It is expected that this action will lead to some savings in future operation and
maintenance costs and provide savings opportunities associated with volume purchasing and
procurement labor costs. The review team and the contractor have also determined that
available resources will make it possible to complete the Dark Sector Lab 2 years earlier than
scheduled. Although no direct dollar savings are associated with this change, the Dark Sector
Lab is an important part of the research being conducted at the South Pole and completing it
ahead of schedule will significantly benefit the science community.

        Contracts for Overseas Aircraft Maintenance and USAP Logistics Support. We
provided NSF management with information useful in negotiating two contracts supporting the
USAP program. In response to a request from NSF’s contracts office, we audited the fixed-
price labor rate proposed by a New Zealand contractor to perform aircraft maintenance for the
USAP. We concluded that the rate calculations and supporting data were presented fairly and
the contracts office accepted the rate as proposed by the contractor.

        NSF recently began its efforts to recompete a contract to provide operations,
maintenance, and management to support the USAP. To assist the contracts office, we are
verifying components of the business proposals submitted in response to NSF’s solicitation.

        The contracts office also asked for our assistance in verifying the proposing firms’
indirect, fringe benefit and overhead rates, and government approval of business systems,
including property and purchasing systems. We are working with the contracts office and the
Defense Contract Audit Agency to verify the information requested and to assist the contracts


NSF OIG Semiannual Report                       7                                  March 1999
office in their evaluation of the rates and systems in the business proposals for this support of
the USAP.

Audit Resolutions From Prior Facilities and Research Centers Reviews

       State/Industry/University Cooperative Research Centers. In our September 1998
Semiannual Report (page 2), we summarized our reviews of three State/Industry/University
Cooperative Research Centers. These reviews identified similar issues at each of the three
Centers involving shortfalls in matching contributions and the accumulation of cash surpluses
from industrial funds. In this reporting period, NSF management resolved two of the three
Center audits.

        We found that one Center misreported matching funds and incorrectly classified
research activities. Of the $1.13 million of industrial matching contributions reported to NSF
by the Center, only $372,000 was acceptable. As a result, the Center fell short of its second-
year matching requirements by $217,000. Accordingly, as required by the cooperative
agreement, we recommended that NSF reduce the Center’s third-year funding by the latter
amount. The university agreed with our audit finding and recommendation and NSF reduced
the Center’s third-year award. NSF also modified the cooperative agreement to establish
additional management controls over the Center’s operations.

        We found that a second Center accumulated an $822,000 cash surplus from industrial
contributions. We recommended that NSF ensure the cash surplus is used in furthering the
project’s objectives before providing additional NSF funding to the Center. During this
period, NSF management reviewed and agreed to the Center’s plans to disburse its remaining
industrial funds before the NSF award’s expiration date.

        Nonprofit Oceanographic Organization. In our September 1998 Semiannual Report
(page 7), we reported that a nonprofit oceanographic organization was proposing indirect cost
and fringe benefit rates that were significantly higher than its actual rates. NSF concurred with
the corrective action we recommended, and it should result in annual savings of more than
$275,000.




NSF OIG Semiannual Report                        8                                  March 1999
Audits Involving Education
and Human Resources Awards
State’s Department of Education Agrees to Meet Cost-Sharing Requirements

        NSF provided a western state department of education with two awards totaling
$9.4 million to support mathematics and science education projects. The agreements provided
that the department would share in the cost of the project by providing over $17 million from
non-NSF sources. However, on one of the awards, we found that the department had provided
less than half of the promised support and is still about $8.6 million short of meeting its cost-
sharing requirement on this award.

        The department asserted that in making its initial funding decision, NSF funded only
about half of the amount requested in the proposal budget and had intended to reduce the
department's cost-sharing obligation under the award by a comparable amount. Our review
found that NSF did not intend to reduce the cost sharing when it reduced the amount of the
award. On the contrary, NSF requested that the department increase its cost-sharing
commitment to help compensate for the difference between the amount requested in the
proposal and the amount awarded. In fact, the department had submitted a revised proposal
that included the increased cost-sharing commitment.

       After locating this revised proposal and discussing it with the department, the
department acknowledged its cost-sharing commitment and agreed to satisfy the commitment in
full. We recommended that NSF closely review the final cost-sharing amount claimed by the
department to ensure that the requirement for this award is met.

       Our review raised a separate but related issue that involved the source of the cost-
sharing contributions. In submitting the proposals for both awards, the department indicated it
planned to use other federal funding to satisfy part of its cost-sharing requirement. We found
that NSF and the department clearly intended that other federal funding would be used to
support the projects and had misclassified these amounts in the award documents as cost
sharing. Accordingly, we recommended that NSF accept the other federal funds as co-
funding, consistent with NSF's intent in making the award.

        In addition to the cost-sharing problems, we found that the department overcharged
$375,000 in indirect costs. While the awards provided funding for indirect costs at fixed,
predetermined rates, the department applied higher rates. The department agreed to make
adjustments to credit NSF for $354,000 of the excessive indirect cost charges. Through its
audit resolution process, NSF continues to negotiate with the department regarding the
remaining $21,000.




NSF OIG Semiannual Report                       9                                  March 1999
Audit Resolutions of Prior Education and Human Resources Reviews

        Graduate Research Traineeship Program. In our March 1998 Semiannual Report
(page 6), we summarized our review of NSF’s Graduate Research Traineeship (GRT)
program. We examined 49 GRT awards for compliance with the program’s cost-sharing and
citizenship requirements (trainees must be either U.S. citizens or permanent residents). We
found that most GRT awardees were in compliance with both the program’s cost-sharing and
citizenship requirements. However, we identified a small number of trainees who were not
U.S. citizens or permanent residents.

       In this and a follow-up review, we recommended that NSF obtain refunds totaling
$302,404, and make improvements to the GRT database and data collection system, which we
believe will strengthen NSF’s oversight of the program’s citizenship requirements. In this
period, NSF management agreed to obtain these refunds, and stated its intent to enhance the
database and data collection strategies of the GRT and other applicable NSF programs to better
capture citizenship information.

        A State’s Department of Education Must Adjust Claimed Costs. In our September
1998 Semiannual Report (page 5), we reported that a northeastern state department of
education received a $9.7 million NSF Statewide Systemic Initiative award to improve the
skills of students and the numbers and quality of individuals who pursue careers in science,
mathematics, and technology. Based on our review, NSF agreed that $155,426 of the
department’s claimed costs were not reasonable or adequately supported, and required the
department to eliminate these costs from its claim.

         NSF Rejects School System's Expenditure Claims. In our March 1998 Semiannual
Report (page 9), we reported that a large school system that received an NSF Urban Systemic
Initiative award to support mathematics, science, and technology claimed $104,658 in
unallowable and unsupported costs. We also found material weaknesses in the school's
accounting system that could impair its ability to support salary costs and to share in project
costs.

        Based on these audit results, NSF required the school system to repay $48,793 of the
unacceptable claimed costs and to offset the remaining $55,865 against unbilled costs. NSF
decided not to continue the award because of awardee performance problems. Subsequently,
the school system presented NSF with additional claims for unbilled project costs. Our review
of these costs resulted in the school system’s decision to withdraw its claim for reimbursement
of the $482,951.

       Funding Reduced to Nonprofit Association. In our March 1998 Semiannual Report
(page 10), we summarized our review of an NSF award to develop a multimedia project by a
nonprofit association. According to the association’s original budget, NSF was to pay 44
percent of the project’s cost and the association agreed to provide the remaining 56 percent.
During our review, we found that the association requested additional funds from NSF,

NSF OIG Semiannual Report                      10                                 March 1999
although the estimated cost to complete the project had decreased. This resulted in a decrease
in the association’s cost-sharing commitment below the agreed upon 56 percent.

        Accordingly, we recommended that NSF reduce the amount of its funding by $294,095,
which includes $46,537 in unallowable costs. In this period, NSF management agreed with
our recommendations noting that the reduction of NSF funds allows the government to share in
the savings associated with a reduced budget.

Issues Involving Research Project Support
        Among NSF’s research-related awards were two made to a university and a
corporation. We found that these organizations needed to improve their financial misconduct
policies, their documentary support for cost sharing, and their grant accounting systems. We
also questioned costs, including those costs to be funded by the grantee that were unallowable
or unsupported.

Audit at a Northeastern University

       In our March 1998 Semiannual Report (page 7), we described the results of an audit of
a cooperative agreement awarded to establish and manage an industry forum for agile
manufacturing, which was transferred from a northeastern university to its subsidiary.
Because of the magnitude of the problems we found with the subsidiary's financial
management of the award, we decided to audit the predecessor agreement with the university.

        NSF entered into a $15.5 million cooperative agreement with the university in 1994 to
develop a vision and address the current implementation status of agile manufacturing, identify
needed changes in practices and related technology, and establish priorities for these changes.
We audited $14.9 million in incurred costs and cost sharing claimed under the first 2 years of
the project. We were unable to determine the reasonableness of over $800,000 claimed by the
university for fixed-price consulting and subcontract agreements because the university did not
require estimates of the hours expended in performing the services or compensation rates
necessary to evaluate their reasonableness. We were also unable to determine the
reasonableness of $1.8 million claimed as cost sharing that consisted of services donated by
employees of other organizations for which the university did not require supporting timesheets
and salary information. As a result, the audit reported a disclaimer of opinion on the
university's schedule of claimed costs and identified a material weakness in internal controls
pertaining to this lack of supporting documentation.

       For the costs that were documented, we questioned an additional $452,619. Examples
include unsupported travel expenses claimed by third-party organizations, consultants paid in
excess of the maximum NSF daily rate, and unsupported car rental costs.




NSF OIG Semiannual Report                     11                                  March 1999
        The university reviewed a draft of our audit report and responded that it believes all
costs charged to the award are valid. NSF is currently working with the university to resolve
these issues.

Japan and Korea Program and Tokyo Office Inspection

        We inspected NSF’s Tokyo Office and its managing program, the Division of
International Programs’ Japan and Korea Program (JKP). The primary function of the Tokyo
Office is to serve as a programmatic liaison among NSF, the U.S. researchers it supports to
work in Japan, and the Japanese government agencies that provide financial and administrative
support for visiting U.S. researchers. The Office also helps visiting NSF officials make
productive contacts, supplies timely information about Japanese science and science policy, and
represents NSF and the U.S. government in negotiations and meetings with Japanese scientists
and government officials. Having an office in Tokyo helps NSF to leverage Japanese financial
and administrative contributions to programs that benefit NSF and the U.S. research and
education community.

      We found that JKP activities were generally consistent with NSF's strategic goals.
Coordination between NSF and other federal agencies concerned with Japanese science
enhanced the effectiveness of these activities and prevented duplication of effort. NSF officials
were working to reduce shortfalls in applicants for available slots in NSF-administered
exchange programs. We also discussed certain strategic issues NSF faces in managing the
Tokyo Office, including how to balance regional and Japan-specific responsibilities.

        We made recommendations to NSF management for improvements in financial
operations related to the Tokyo Office. These recommendations included making provision for
NSF’s unfunded liability for retirement obligations for Japanese employees who work in the
Tokyo Office, reviewing and documenting the need for the petty cash fund that the Office
maintains, and providing appropriate guidance so that funds in two Japan-related donation
accounts can be properly expended. NSF said it found our recommendations useful and was
taking action on all of them. It agreed that the unfunded liability needed specific action and
that better procedures for managing the petty cash fund would be helpful. NSF officials are
developing plans to spend the remaining funds in the donation accounts.

A University Department of Earth and Planetary Sciences Inspection

      We reviewed programmatic, administrative, and financial aspects of eight grants
awarded to a university Department of Earth and Planetary Sciences.

       We were favorably impressed by the research facilities and positive research
atmosphere we observed in the Department. PIs and students we visited interacted closely on
NSF-supported research. PIs expressed confidence in NSF’s peer review process, and PIs,
administrators, and NSF program officers said that FastLane, NSF’s integrated electronic
proposal and award system, made it easier for them to review proposals, obtain information

NSF OIG Semiannual Report                      12                                  March 1999
about NSF, and submit proposals and project reports. Although some had some difficulties
with FastLane, all expressed confidence that these would be eliminated as the system is
refined.

        We made a few recommendations for improvement. For example, we recommended
that the university should develop and publish a policy for the retention of and access to
federally funded research data, and the university should specify a standard of proof for its
misconduct policy. The university agreed with these recommendations and stated our report
was “quite helpful to the University.”

Audit of a Northwest Information Technology Corporation

       NSF's Networking and Communication Research and Infrastructure Division awarded
two grants, totaling $1,063,039, to a northwest corporation to expand a network for
supercomputer users. We performed a financial and compliance audit of these awards and
questioned 18 percent (or $193,418) of the costs claimed by the corporation.

        The incorrect calculation and application of fringe benefit rates and indirect cost rates
accounted for $99,739 of the costs questioned. We also questioned $41,201 related to salaries
that were charged to NSF grants as both direct and indirect costs. Of the remaining questioned
costs, most were not supported by time sheets or other source documentation. We also found
that the corporation accounted for all NSF grants in a single fund, which made it more difficult
to reconcile and support costs for each individual grant.

        The corporation has begun to implement our recommendations to improve its internal
control system and is refunding to NSF all of the $191,347 in questioned costs.



Summary of Other Significant
Audits of NSF Awards
        During this reporting period, in addition to the reports explained above, we completed
13 financial and compliance audits covering education, human resources, and research awards
totaling more than $59 million. The institutions audited ranged from public organizations,
such as universities, local school districts, and state departments of education, to private
organizations, such as museums and small research institutes.

        These audits identified a total of $1,046,033 of questioned direct costs and $647,391 of
cost-sharing contributions questioned. We also found $3,835,226 in cost-sharing commitments
that may not be satisfied by the institutions. Many of the institutions have responded favorably
to our audits by implementing our recommendations and refunding the questioned costs. Some
of the more significant findings from these audits follow:


NSF OIG Semiannual Report                      13                                  March 1999
•   A Midwestern museum charged $209,677 in salaries, fringe benefits, equipment, supplies,
    and related indirect costs to the awards after the projects were substantially completed,
    thereby indicating that the expenses were not necessary or reasonable.

•   A southeastern university, whose $350,000 award had expired, was unable to adequately
    justify the need to use the unspent $40,687. Accordingly, NSF closed the award and
    deobligated the funds to preclude the university from charging further unrelated costs to the
    award.

•   Four awardees used funds totaling $162,072 that had been specifically awarded for
    participant support for unauthorized purposes.

Review of Awardee A-133 Audit Reports

         OMB Circular A-133, issued pursuant to the Single Audit Act of 1984, sets forth
standards for obtaining consistency and uniformity among federal agencies for the audit of
states, local governments, and nonprofit organizations expending federal awards. Reports
prepared by independent auditors in accordance with this circular are referred to as A-133
audit reports.

        We reviewed 97 A-133 audit reports for not-for-profit and for-profit institutions for the
fiscal year ended September 1998. Included in these A-133 audits were 1,047 NSF awards,
totaling $189,742,153, from every NSF directorate.

        The audits disclosed that institutions generally complied with the terms of the awards
and have adequate financial controls and procedures. The auditors did, however, find a small
amount of questioned costs, $142,632, and some internal control and compliance issues.
Examples of questioned costs include: consultant payments made in excess of the maximum
allowable rate, fellowship payments made in excess of the amount allowed by NSF policy,
travel costs not supported by documentation, and the costs of firm fixed-price awards charged
to a cost reimbursable award.

        Some audit reports also cited internal control findings. For example, some awardees
did not (1) adequately monitor subrecipients, (2) develop plans to ensure Y2K computer
compliance, (3) adequately review and document costs incurred, and (4) adequately segregate
accounting duties. The primary compliance findings were that some awardees failed to submit
timely, required federal performance and financial reports and that procurement and property
management systems of several awardees were not in compliance with federal regulations.




NSF OIG Semiannual Report                      14                                  March 1999
                             Integrity
        W
                      e are responsible for investigating possible wrongdoing in-
                       volving organizations or individuals that receive awards
                       from, conduct business with, or work for NSF. In investigat-
                       ing these allegations we assess their seriousness and recom-
mend proportionate action. When appropriate, the results of these investigations are
referred to the Department of Justice or other prosecutorial authorities for criminal
prosecution or civil litigation, or to NSF for administrative resolution.

        Among our responsibilities are investigating allegations of misconduct
in science, engineering, and education, such as falsification, fabrication, and
plagiarism. Misconduct in science strikes at the core of NSF’s mission, and it
is a special concern for our Office. In investigating these allegations, we


        evaluate scientists’ conduct according to the ethical standards of their
    •   professional communities’ accepted practices,


        rely on the professional community at NSF and awardee institutions to
    •   articulate and evaluate these standards, and


        recommend findings of misconduct in science only for “serious
    •   deviations” from those standards.



                              HIGHLIGHTS
        Forming Investigative Partnerships                                              16
        Misconduct Investigations Forwarded to the Deputy Director                      17
        Findings of Misconduct in Science                                               19
        Prosecutorial Referrals Resulting in Civil or Criminal Settlements              21
        Combined Integrity and Efficiency Reviews                                       23
        Overview of Integrity Cases and Certain Recurring Issues                        26
        Statistical Tables                                                              31
                                             15
FORMING INVESTIGATIVE
PARTNERSHIPS TO RESOLVE CASES
       Our November 1998 Strategic Plan emphasizes the importance of forming partnerships
through our integrity efforts with members of the scientific and law enforcement communities.
By working closely with our partners, everyone benefits from sharing experience and different
perspectives and opinions. We apply the understandings we gain in the particular matter under
review and in subsequent cases.

         In civil and criminal matters we often work with awardee grants officials gathering
information necessary to determine whether a matter appears to have violated a law or
regulation. In instances where these matters involve individuals who have funding from other
federal agencies, we work closely with staff from other IG offices as well as the Federal Bureau
of Investigations (FBI), Defense Criminal Investigative Service (DCIS), and other law
enforcement organizations. Once we have developed sufficient information to advise
prosecutorial decisions about whether to pursue a case, we assist prosecutorial authorities in
completing the investigation. For example, in this report, we describe two false claims cases in
which we coordinated our efforts closely with university officials and law enforcement agencies
to assist prosecutorial authorities in developing satisfactory resolutions to these matters (see
pages 21 and 22). We also served as a liaison between local law enforcement officials and
scientific personnel to improve working relationships and enhance security at an NSF-funded
facility.

        Through the process of resolving allegations of misconduct in science, we have
developed strong, long-standing partnerships with awardee officials and NSF program officers
across the scientific disciplines. NSF believes that awardee institutions are primarily responsible
for the prevention and detection of misconduct, and our practice is to refer substantive
allegations of misconduct in science to awardees for investigation. In this partnership, we
contribute the experience gained from handling different types of allegations in many situations
while relying on the experience and knowledge of awardee officials as well as the committees of
experts they convene to assess these cases. We also frequently draw on the scientific expertise at
NSF to assess scientific issues and provide us with insight concerning their scientific
communities.

       In this period, we met with awardee officials who were either beginning or in the process
of conducting misconduct investigations. We worked closely with awardee officials and
committees to develop satisfactory resolutions for our referred cases. The following misconduct
cases describe successful outcomes that were developed through these partnerships.




NSF OIG Semiannual Report                       16                               March 1999
SUMMARY OF REFERRALS TO AGENCY
MANAGEMENT FOR ADJUDICATION
Plagiarism in Proposals Submitted to Two Different NSF Directorates

        We received evidence of plagiarism in two NSF proposals submitted by a full professor
to different NSF directorates about 2 months apart. The first proposal, requesting support for
travel to another country to do research, was a pending award. The second proposal, requesting
more substantial funds to support research work at the subject’s university, had recently been
declined. Over 90 percent of the text in both proposals was identical to an earlier NSF-funded
proposal (the source proposal) submitted by another scientist (the author).

        Although the subject had over 30 years of experience as a researcher and teacher, he did
not indicate that the language of his proposals was taken from the source proposal and was not
his original work. In our interview with the subject, he explained that he believed he had
implicit permission from the author to use the text because they had been collaborators and the
author had voluntarily provided him with a copy of the source proposal. The author told us that
he had not given the subject permission to copy the text from the proposal and could not recall
providing him with a copy.

       We referred the investigation in this case to the subject’s university. Immediately
following our referral, we recommended, and NSF took, interim administrative action to defer a
funding decision on the subject’s first proposal pending resolution of the allegations of
misconduct in science.

       The university decided that the author was not a collaborator on the subject’s proposals
and that the copied text was not shared intellectual property. It found that the subject’s use of
verbatim material in his two proposals constituted plagiarism and that the subject acted
recklessly.

        The university sent the subject a letter of reprimand requiring that he: (1) not submit
federal or state proposals and not serve as a PI on federal or state awards for 3 years, (2)
withdraw his pending proposal that requested $12,192, (3) certify to the originality of any
external proposals for an additional 2 years, and (4) read materials and attend
workshops/meetings on the topic of integrity in research.

        We concluded that the university’s action regarding the subject’s misconduct was
significant and balanced. We recommended that NSF’s interests would be served sufficiently by
affirming that the subject committed misconduct in science and by sending him a letter of
reprimand.




NSF OIG Semiannual Report                        17                               March 1999
Multiple Allegations of Plagiarism in Connection With NSF Proposals

       We received allegations of plagiarism against the subject, an assistant professor,
including one instance in which he copied 5-1/2 pages of material into an NSF proposal without
providing adequate attribution. In each instance, the subject included general references to the
source material, but did not indicate that the text was taken verbatim from the source material.
Through our inquiry, we discovered that the subject submitted five NSF proposals that contained
material copied without adequate attribution.

         We referred the investigation to the subject’s university. The university’s investigative
process identified other instances of unattributed copying in the five proposals discovered by our
office and in three more proposals submitted by the subject to NSF and another federal agency.
The university determined that the subject submitted eight proposals with inadequately attributed
text; in four, the copying was limited to several sentences from abstracts. Four of the eight
proposals were slight revisions of earlier proposals.

        The university concluded that each instance of copying without adequate attribution was
plagiarism, and therefore misconduct in science. Although the copied passages varied in length,
the university considered each instance to be a significant deviation from accepted practices.
After receiving the university’s investigation report, the subject agreed to resign from his
university position.

        We agreed with the university that the subject committed misconduct in science. For
NSF’s purposes, we considered the instance involving 5-1/2 pages of copying without adequate
attribution to be plagiarism and the other instances as reflecting a pattern of unacceptable
behavior. We recommended that NSF send the subject a letter of reprimand concluding that he
committed misconduct in science and require him to provide certifications and assurances in
connection with any requests for NSF funding for 3 years. Since some of the eight proposals
were submitted to other agencies, we suggested that NSF discuss its conclusions with other
federal agencies. We concluded that the university’s actions were otherwise sufficient to protect
NSF’s interests.




NSF OIG Semiannual Report                       18                              March 1999
Deputy Director Concludes PI’s Misrepresentations are Misconduct
        In our September 1997 Semiannual Report (pages 36-37), we described our investigation
into allegations that a professor had misrepresented his research progress and capabilities in
proposals and progress reports submitted to NSF. The Deputy Director concluded that the PI’s
misrepresentations “constituted falsification and a serious deviation from accepted practices
within the scientific community” and misconduct in science. The Deputy Director determined
that the subject’s misrepresentation was a “critical aspect of his research” and that he would not
have been awarded the level of support he received in its absence.

        The Deputy Director decided upon remedial actions. For the next 2 years, in connection
with any proposal or report submitted to NSF, the subject must provide our office with specific
certifications as well as assurances from his department chairperson or dean. He must certify and
the administration official must ensure (to the best of his or her knowledge) that the submission
accurately reflects the subject’s research status and results, and that the status, results, and the
subject’s claims about his research capabilities are supported by appropriate documentation.
Additionally, with each submission, the subject must certify that he has reviewed NSF’s
misconduct regulation and that the submission is free of any misconduct, and the administration
official must ensure that the submission does not contain any falsification or fabrication.

NSF Concludes Graduate Student Fabricated Data
        In our September 1998 Semiannual Report (page 16), we described a case in which a
graduate student had received a doctorate in chemistry on the basis of a dissertation that was
“based on fraudulent data.” In agreeing with our recommended findings, NSF's Deputy Director
concluded that the graduate student “deliberately fabricated the data by cutting and pasting
spectra,” a serious deviation from accepted practices and misconduct in science. In his
reprimand, he concluded that “[r]esearch fabrication is a serious offense because it distorts the
scientific record. The scientific record is the foundation for all scientific research.” Consistent
with our recommendations, he took no further action to protect the federal government’s interest
because the university had taken numerous steps to address the misconduct and the student has
not worked in chemistry since she forfeited her degree.

Improper Use of Graduate Students’ Theses is Misconduct

        In our September 1998 Semiannual Report (page 38), we discussed a case of a faculty
advisor who, on two separate occasions, plagiarized materials from his graduate students’
Master’s theses into two of his publications without providing them authorship credit or
appropriately citing the theses. The university’s investigation committee found that the subject
had seriously deviated from accepted practices when he failed to provide authorship credit to the
students. The committee stated that the subject’s own department considered providing a




NSF OIG Semiannual Report                        19                               March 1999
student with co-authorship credit on such papers as accepted practice in the scientific
community.

       NSF’s Deputy Director concurred with the committee and us that the subject’s use of
“two students’ [Master’s] theses without providing them appropriate credit is a serious deviation
from accepted practices within the scientific community and that [the subject] engaged in
misconduct in science.” The Deputy Director reprimanded the subject and expressed “strong
disapproval of [the subject’s] conduct in this matter,” and informed him that “[a]ny repeat
occurrence of misconduct in science in connection with NSF-funded activities could result in
NSF taking more severe action.” This action was consistent with our recommendations.

NSF Concludes a Subject Committed Plagiarism in SBIR Proposal

        In our March 1998 Semiannual Report (pages 27-28), we discussed the case of a subject
who, as president of a small business, was alleged to have plagiarized material from a published
paper into his NSF Small Business Innovation Research (SBIR) proposal. We concluded that the
subject plagiarized ideas, text, formulas, figures, and references from three published papers.
Consistent with our recommendations, NSF’s Deputy Director sent the subject a letter of
reprimand concluding that he committed misconduct in science, imposed a certification
requirement, and excluded the subject from serving as a reviewer for 3 years.

NSF Reprimands Student Who Committed Fabrication and Falsification
        In our September 1998 Semiannual Report (page 17), we described the Deputy Director’s
conclusion that an undergraduate student committed misconduct in science by fabricating data
and falsifying timecards over an 11-month period in two different laboratories. The Deputy
Director proposed to debar the student, who in response cited several reasons why she should not
be debarred. NSF concluded that the evidence did not support most of the student’s claims.
However, it concluded that debarment was unnecessary because the student was an
undergraduate who had already suffered severe consequences for her misconduct, and she was
neither pursuing a career in science nor planning to work in a federally funded laboratory. NSF
issued a strong letter of reprimand explaining why the student’s claims and excuses were not
credible and concluded that she had committed “severe” misconduct.




NSF OIG Semiannual Report                       20                               March 1999
SUMMARY OF REFERRALS TO
PROSECUTORIAL AUTHORITIES
University Professor Pleads Guilty to Abuse of Official Capacity

        A coordinated state and federal investigation, led by our office, resulted in a guilty plea
by a professor of computer science. The professor was PI and co-PI on research awards from
NSF as well as other federal, state, and private grant-making entities. We led the investigative
team that included FBI and DCIS agents. During our investigation, we worked closely with
university internal auditors, who conducted their own internal review of the professor's activities.
We found that the professor routinely charged expenses directly related to his private businesses
to research accounts at the university. The professor did not disclose his outside business
interests to the university as required and made affirmative statements to conceal these business
interests. In February 1998, a state grand jury indicted the professor on Abuse of Official
Capacity for using government money, which the professor had through his employment at the
state university and as a public servant, to support his private businesses.

        In November 1998, the professor pled guilty to 28 acts of Abuse of Official Capacity.
The state court ordered him to pay a $5,000 fine and restitution of $38,000 and to serve a
5-year probation with deferred adjudication. If the professor successfully serves the 5-year
probation, he can request that the conviction be expunged from his record. In conjunction with
the state’s plea agreement, the U.S. Attorney’s Office agreed not to prosecute the professor for
federal offenses arising out of his activities.

        One of the professor’s companies submitted proposals and obtained federal research
awards through the SBIR programs administered by NSF and the Department of Defense (DoD).
Based on the indictment, DoD suspended the professor and his companies from eligibility for
federal grants and contracts, and it terminated a pending $750,000 SBIR award to the company.
As a result of the guilty plea, DoD proposed debarment of the professor and his companies for 5
years.

        The university found that the professor had wrongfully charged an NSF grant for salary
and fringe benefits, telephone charges, miscellaneous charges, and indirect costs. The university
returned $100,349 to the NSF grant to fund continued research by the other PIs. The university
also returned $60,582 of unspent funds on another NSF award that expired during the
investigation. The university and a state agency terminated a $235,000 state grant because the
professor did not disclose that the $170,000 in matching industrial support pledged for the
project was from one of the professor’s own companies. The university initiated proceedings to
terminate the professor’s employment and, in March 1999, a university faculty senate committee
determined that the evidence supported termination.




NSF OIG Semiannual Report                        21                               March 1999
Director of NSF-Funded Research Center
Sentenced for Falsifying Reports to NSF

        In November 1998, a professor of engineering who served as the director of an NSF-
funded research center pled guilty to a misdemeanor violation of 18 U.S.C. § 1003, Demands
Against the United States, for using false statements to obtain money from the United States.
After being informed of a university investigation, we worked with the university and the FBI
and found that the director overstated the number of industrial members in annual reports to NSF
by nearly 50 percent. The largest misrepresentations occurred during the crucial sixth-year
review of the center, when NSF determines whether to continue or to phase out NSF support for
the center. NSF officials, who had awarded over $23 million to the center since its inception,
advised us that these misrepresentations of membership would have influenced NSF’s reviews of
the center and its eligibility for future funding and could have affected NSF’s decision to fund
the center.

       During our investigation, the center director resigned from his position with the center
but maintained his position as a professor at the university. In addition, NSF program staff
conducted a site visit to the center and decided to reduce funding for the center the following
year and terminate it thereafter—thereby allowing NSF program managers to allocate
approximately $3.2 million to other research centers.

        In January 1999, the former center director was sentenced to serve a 3-month
imprisonment followed by a 1-year, supervised probation, and to pay a $10,000 fine. We
worked with NSF management, the U.S. Attorney’s office, and defense counsel to develop a plea
agreement that limited the former center director’s receipt of assistance and benefits under
federal programs and activities for 3 years.

        In addition to the activities of the former center director, we found that the project
administrator instructed two employees to overstate their hours to receive additional pay, which
led to improper payroll charges of $9,513. The Department of Justice (DOJ) declined criminal
prosecution of the project administrator because: (1) the institution had returned the improper
charges to the NSF grant, leaving no financial loss to NSF; (2) the project administrator did not
gain financially from the improper charges; and (3) the institution had taken administrative
action against the administrator, which included a reprimand and a demotion.

Company Pays $75,000 in Civil Settlement Involving SBIR Award

        A company received an initial $49,032 SBIR award from NSF. We found that the
company president was ineligible to be the PI on the award because he was a full-time employee
at a university during most of the award period. In addition, the company president presented
research results in the SBIR final technical report as having been obtained under the NSF SBIR
award, when in fact the data had been obtained before the NSF SBIR award was made. In a civil
settlement with DOJ, the company paid $75,000 to resolve this matter.




NSF OIG Semiannual Report                       22                              March 1999
Combined Integrity and Efficiency Reviews
         While our investigative efforts focus on resolving integrity issues that generally involve
particular NSF awards, some cases or complaints raise issues that require us to review systemic
issues or issues about the efficient expenditure of funds under NSF awards. We create
multidisciplinary teams of integrity and efficiency staff members who work closely with NSF
management to review these matters and make recommendations designed to improve programs
and operations. In this period, we completed combined integrity and efficiency reviews
involving: certain aspects of the SBIR program, a retraining program, and the application of
eligibility criteria for an NSF program.

Size and Commercialization Information
are Important for NSF’s Small Business Program
         The Small Business Administration’s regulations limit businesses that participate in the
SBIR and Small Business Technology Transfer (STTR) programs to a maximum of 500
employees, including the employees of affiliated businesses that control or are controlled by the
applicant company. We found that six of the seven companies we reviewed had received more
than $3 million from NSF affiliates. Few of these applicant companies clearly revealed their
affiliates in proposals to NSF. In two instances, applicant companies did not disclose affiliations
that could make them ineligible to participate in the SBIR/STTR programs. For example, one
applicant company had become a subsidiary of a large parent-holding company, yet the
subsidiary reported to NSF that it employed only 20 people.

        Failure to reveal affiliates distorts the merit review process for selecting SBIR awards
and also masks possible ineligibility. Accordingly, we recommended and NSF agreed to require
applicant companies to disclose the names of all affiliated businesses and to report the total
number of the company’s employees and its affiliates. Pursuant to our request, the Small
Business Administration is carrying out the formal size determination on two companies that we
identified because their extensive corporate affiliations may exceed the size limitation for a small
business.

        We also reviewed the effects of affiliates on NSF’s assessment of a company’s
commercialization track record, an important factor in deciding whether to make an award. In
order for NSF to assess past commercialization, companies are required to provide information
about “follow-on funding” and the sales of SBIR-developed technologies. Our review indicated
that NSF would have a better basis for assessing commercial potential if companies provided a
breakdown of the sources of follow-on funding and sales. Accordingly, we recommended that
NSF require applicants to distinguish follow-on funding and sales originating from the applicant
company, affiliates, and unaffiliated companies. NSF is considering how to best implement this
recommendation in future program solicitations.




NSF OIG Semiannual Report                        23                               March 1999
Review of Financial Expenditures Under Fixed-Price SBIR Phase II Awards

         In 1994, NSF began issuing SBIR Phase II awards in fixed-price amounts. NSF makes
periodic payments based on progress reports and a final report from the awardee that addresses
technical progress and provides estimates of funds expended. We used desk reviews to evaluate
the first three sets of semiannual reports provided by Phase II awardees under the fixed-price
funding mechanism to ascertain overall compliance with reporting requirements and review
procedures. We did not endeavor to review the overall quality of NSF’s technical or
administrative oversight of SBIR Phase II awards.

        We found that the estimated expenditures reported by about half the awardees were less
than the final NSF award amount, and that six of these were significantly less. An on-site
financial review of two of these awards disclosed profit margins that significantly exceeded the
negotiated margins.

        We used our review’s results on the first round of awards to work with NSF in
developing our recommendations, and NSF agreed to implement them. NSF managers will
ensure that Phase II awardees' reports are used to determine when estimated expenditures fall
behind budget amounts by a significant percentage. NSF also agreed to establish a common and
consistent approach to determine whether funds are significantly underspent at the time the
request for final payment is made. In appropriate circumstances, NSF managers will also re-
negotiate the award amount or adjust the timing of progress or final payments.

Failure to Meet Award Objectives Results in Reduced Project Costs
       In 1994, NSF awarded $550,000 to a university to provide partial support for a 3-year
program developed by another agency, which was designed to retrain displaced defense
engineers in the environmental engineering field. In addition to classroom instruction, the
program aimed to provide the engineers with career development skills and on-the-job training.
The university agreed to provide $583,507 in cost sharing from industry and university sources
to support the project. The university originally anticipated that the majority of the industry
funds would be provided in support of an “externship” program in which the participants would
be paid while receiving on-the-job training (working for the industrial participants).

        Acting upon a referral from an NSF program officer, we conducted a review of this
award. We found that while the program’s academic objectives were substantially met, the
externship program did not meet NSF expectations. Specifically, the PIs encountered difficulty
obtaining suitable externships for the program’s participants, and they neither took corrective
action nor fully notified NSF of these difficulties. We also found that the university had not
maintained documentation to support cost sharing. A majority of the proposed cost sharing was
to come from industrial support for the externships. Efforts to collect cost-sharing information
were made only after NSF grant officials cautioned university officials that their inability to
document their claims could result in an audit.




NSF OIG Semiannual Report                       24                              March 1999
        With the advice and assistance of NSF program officers, we reviewed financial records to
determine the total cost of the project. We found that of the $527,240 claimed as cost sharing,
only $218,382 was both supported and related to the project objectives. We believe that if paid
industry externships had been provided as proposed, the cost-sharing obligation would have been
met. Consistent with requirements for the award, NSF agreed to pay only 49 percent of the
project costs. Therefore, the total charge to NSF should have been $145,351 less than the actual
amount charged.

         Although the university did not maintain cost-sharing documentation and did not satisfy
its cost-sharing obligation, it submitted signed cost-sharing certifications and annual progress
reports with tables listing larger than actual cost-sharing amounts contributed for the year.
Because the evidence we found indicated that these certifications and reports were false, we
referred our findings to the cognizant U.S. Attorney’s Office, which declined to prosecute
because of the lack of evidence of personal financial benefit to any of the individuals who
prepared the reports or certifications.

        We concluded that the university’s failure to meet the award’s externship objectives led
to a substantial shortfall in cost sharing, and the university should repay NSF $145,351, the
excess federal contribution to the project. We recommended that the university develop a cost-
sharing policy that will help ensure that it meets cost-sharing requirements and provides accurate
reports and certifications in the future. We also recommended that NSF review and approve the
university’s policies before making any future awards that require cost sharing. NSF agreed with
our recommendations and is currently addressing them through the audit resolution process.

Application of Selection Criteria for Eligibility for an NSF Program
        After receiving a complaint that a university was eligible to apply for an award but had
been excluded from the competition, we reviewed the selection criteria for an NSF program that
made awards to universities that demonstrate excellence in research and education. The research
and education program, which in 1997 granted awards to 10 of 137 eligible institutions, focused
on institutions with strong graduate programs in both research and education. We learned that
one branch of the university was not included in the eligibility list because it had conferred very
few doctorates. Another branch was not included because it received little federal research
funding. We found that NSF’s selection criteria were reasonable, and that the omission of this
university from the eligibility list was consistent with the program’s focus on research-intensive
universities.




NSF OIG Semiannual Report                       25                               March 1999
Overview of Integrity Matters
Processed This Period
         During this period, we closed 63 integrity cases. Of these, we considered 30 to involve
civil or criminal matters and 33 to involve administrative matters, including misconduct in
science.

        We focus our criminal and civil investigative resources on allegations of intentional
diversion of NSF funds and material false statements in information submitted to NSF.
Intentional diversion of NSF funds for personal use is a criminal act, which can be prosecuted
under several statutes. Investigation of diversion allegations is a priority for our office. We
encourage awardees to notify NSF of any significant problems relating to the misuse of NSF
funds. Early notification of significant problems increases our ability to investigate the diversion
of grant funds. Further, NSF’s peer review process is premised on the truthfulness of
information submitted to NSF in proposals and progress reports. A material false statement in an
NSF proposal could result in funds being improperly awarded, and if sufficiently serious can be
considered a violation of civil or criminal law.

        Our investigative case activity this period is in the statistical data section, see page 31. In
addition to closing 30 cases involving alleged civil or criminal matters after a review of the
relevant facts, we referred two new matters to DOJ involving allegations that individuals
received grant funds by submitting false statements. We are currently working with DOJ to
resolve one of the new referrals. The other matter involved an SBIR awardee that received
duplicate funding from NSF and the National Aeronautics and Space Administration. This
matter was declined by DOJ because the subject of the investigation is incarcerated in a foreign
country for fraud. The National Aeronautics and Space Administration initiated administrative
proceedings to prevent the subject from obtaining federal funding should he return to the United
States.

       We also worked with DOJ to resolve three cases that we referred in previous reporting
periods, as well as two cases filed under the qui tam provisions of the civil False Claims Act
(which allows a private citizen to file a complaint for fraud perpetrated against the federal
government). DOJ proceeded to file its own complaint in one qui tam matter that involved a
multi-agency investigation of a government contractor. We worked with NSF staff and DOJ to
determine that the other qui tam matter does not primarily implicate the interests of NSF,
although the matter is still pending (regarding alleged claims made to another agency).

        Our misconduct case activity this period is in the statistical data section, see page 31. We
referred the inquiry or investigation in three cases to awardee institutions. Through the referral
process, institution committees reviewed eight cases. We closed 33 cases this period. Of these,
21 were closed after a misconduct inquiry and 12 were determined to be management concerns
and not issues for our office.




NSF OIG Semiannual Report                         26                                 March 1999
         Although several of the 21 cases contained multiple allegations of misconduct in science,
each can be described by a single primary allegation. The primary allegations include
intellectual theft (six cases), verbatim plagiarism (five cases), abuse of a colleague or graduate
student (two cases), breach of confidentiality of peer review (two cases), failure to share data
(two cases), duplicate submission of a proposal (two cases), retaliation against a good-faith
whistleblower (one case), and misrepresentation in a proposal (one case). For those cases closed
at the inquiry stage, 10 were closed after we obtained information from the subject.

University Procedures Should Be Fair and Efficacious

       The importance of fair and efficient procedures by awardee institutions is illustrated by
two cases we closed this period in which the awardee institution conducted unnecessary
procedures. At NSF and many of its awardee institutions, misconduct cases are handled in a
two-stage investigative process. An inquiry determines whether an allegation of misconduct has
substance and requires investigation, and an investigation thoroughly and carefully assembles the
relevant facts.

        Some awardee institutions have introduced an additional pre-inquiry stage that appears to
duplicate the inquiry function. In two cases closed this period, the pre-inquiries developed ample
information for university administrators to determine whether the allegations had substance, and
university administrators worked effectively with us to address matters of shared concern. In
these cases, we believe a further “inquiry” would have been superfluous. In one case, a
committee of three faculty members reached its conclusion after examining hundreds of pages of
documents; in the other, the university’s misconduct official interviewed seven witnesses and
examined departmental work and financial records. In our view, the procedures employed in
each of these cases amounted to an inquiry and the conclusion should have been a decision about
whether the case required an investigation.

        We found during numerous inspections and cases that many awardee institutions’
misconduct procedures require that the institution perform an inquiry even when we have already
conducted an inquiry and referred the case to them for investigation. Where an investigation will
be conducted in any event, for our purposes, this second inquiry is a redundant, time-consuming
effort. We suggest that institutions consider reviewing the evidence of our inquiries and moving
directly to an investigation instead of conducting their own inquiries.

       It is in everyone’s interest—subjects, complainants, awardee institutions, and the federal
government—to resolve misconduct cases efficiently and thoroughly. This can best be
accomplished through procedures that yield expeditious decisions about whether allegations have
substance and require investigation.




NSF OIG Semiannual Report                       27                              March 1999
When Collaborative Relationships Break Down

        We handled three cases during this period involving collaborative relationships. We
found that each case resulted from errors in communication and judgment, and none was so
serious as to rise to the level of misconduct in science.

        In the first case, a university informed us that it had informally handled an allegation that
a PI had included material in a sole-authored proposal to NSF that he plagiarized from a
manuscript prepared collaboratively by him and others. The PI made unattributed use of
material and ideas from the collaborative manuscript for which he was a major contributor and
primary author. His department informally concluded that his actions constituted plagiarism
without explicitly assessing how serious they were. The PI, given the option by his department
to acknowledge misconduct and agree to administrative actions, had chosen to do so instead of
undergoing a formal investigation. Based on our experience, we concluded that the PI’s actions,
while reflecting inappropriate behavior based on the extant standards in his department, were not
sufficiently serious to be considered misconduct in science at the federal level.

        In the second case, two scientists allegedly misappropriated confidential material from a
research team with which they were collaborating and published it as independent research. We
determined that there was no confidentiality agreement between the scientists and the research
team. In addition, after evaluating the expertise of the parties and the timing of their research
findings, we determined that the published work was an independent effort that was contiguous
with earlier work done by the two scientists and that its main ideas were not misappropriated
from the research team. However, we concluded that the two scientists could have avoided these
allegations if they had agreed with their collaborators at the outset of the project how results
would be shared and published and what independent uses could be made of joint work.

        In the third case, the complainant alleged that the department chair (the subject) copied
text without attribution from the complainant’s earlier NSF proposal into an NSF proposal to
purchase equipment to support curriculum development. The subject had requested faculty
members who wanted to participate in the project to provide written descriptions of their
intended use of the equipment in their courses and research. The complainant provided text from
her earlier NSF proposal as her contribution. The subject explained that she used all the faculty
members’ contributions to the proposal, unedited, with no attribution. The subject said the
complainant knew the subject’s proposal was a departmental one. The complainant, however,
said she did not know the subject would use the text verbatim without attribution and submit the
proposal without her being included as co-PI. We concluded that NSF and its reviewers would
ordinarily recognize that this type of proposal represents a departmental effort, including
contributions from individuals other than the PI. Under these circumstances, we concluded that
the use of the complainant’s verbatim text without attribution in the subject’s proposal did not
constitute plagiarism.




NSF OIG Semiannual Report                        28                                March 1999
        There are no universal or accepted norms that govern behavior between collaborators.
Collaborative disputes are often brought to our attention as allegations of misconduct in science
when the participants fail to have a clear understanding of their rights and responsibilities before
the work commences. These cases in particular highlight the importance of clear and timely
communications in collaborative projects about expectations of confidentiality, authorship rights
to results, and the rights to use collaboratively obtained information in future funding requests.




NSF OIG Semiannual Report                        29                               March 1999
     Statistical Data

        Audit Reports Issued With Recommendations
32      for Better Use of Funds


33      Audit Reports Issued With Questioned Costs


34      Additional Performance Measures


35      Audit Reports Involving Cost-Sharing Shortfalls


36      Status of Systemic Recommendations
        That Involve Internal NSF Management


        List of Reports                                       37
        Audit Reports With Outstanding Management Decisions   39
        Investigative Activity and Statistics                 41
        Misconduct Case Activity and
        Assurances/Certifications Received
                                                              42


                              31
AUDIT REPORTS ISSUED WITH
RECOMMENDATIONS FOR BETTER USE OF FUNDS


                                                                        Dollar Value

A.     For which no management decision has been made by the              6,540,411
       commencement of the reporting period



B.     Recommendations that were issued during the reporting period       3,106,544
       (these were issued in 5 reports)



C.     Adjustments related to prior recommendations                         200,000



Subtotal of A+B+C                                                         9,846,955



D.     For which a management decision was made during the                  6,288,598
       reporting period



       (i) dollar value of management decisions that were consistent      6,232,733
           with OIG recommendations



       (ii) dollar value of recommendations that were not agreed             55,865
            to by management



E.     For which no management decision had been made by the end of       3,558,357
       the reporting period



For which no management decision was made within 6 months of issuance     3,293,500




NSF OIG Semiannual Report                        32                       March 1999
AUDIT REPORTS ISSUED
WITH QUESTIONED COSTS


                                                                  Questioned   Unsupported
                                                        Number    Costs           Costs



A.     For which no management decision has               39     10,638,622       5,110,146
       been made by the commencement of the
       reporting period



B.     That were issued during the reporting              28      4,349,653       1,285,650
       period



C.     Adjustments related to prior recommendations        0              0                 0


Subtotal of A+B+C                                         67     14,988,275       6,395,796


D.     For which a management decision was                42      6,080,238       2,912,377
       made during the reporting period



         (i) dollar value of disallowed costs            N/A      2,083,102             N/A


       (ii) dollar value of costs not disallowed         N/A      3,997,136             N/A


E.     For which no management decision had               25      8,908,037       3,483,419
       been made by the end of the reporting
       period



For which no management decision was made                 10      5,106,160       2,294,869
within 6 months of issuance




NSF OIG Semiannual Report                          33                          March 1999
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
41 and 42 . General Accounting Office and OMB suggested that Offices of Inspector General
develop additional performance measures that provide information about their activities. As a
result, we developed 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
non-federal 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 non-federal
sources.

       We divide cost-sharing shortfalls into two categories. Shortfalls occurring during the life of
a project indicate that the grantee may not be able to provide all promised resources from non-
federal 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 35 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 presenta-
tion. 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 36 pro-
vides statistical information about the status of all systemic recommendations that involve NSF’s
internal operations.




NSF OIG Semiannual Report                          34                                        March 1999
 AUDIT REPORTS INVOLVING
 COST-SHARING SHORTFALLS
                                                Number         Cost-Sharing          At Risk of         Cost-Sharing
                                                  of            Promised            Cost-Sharing        Shortfalls at
                                                Reports                              Shortfall/       Completion of the
                                                                                  (Ongoing Project)       Project

A.     For which no management decision
        has been made by the beginning of
        the reporting period

        1. Reports with monetary findings          19              49,746,159           26,856,207          1,639,287
        2. Reports with compliance findings         2                   N/A                   N/A                  N/A
B.     That were issued during the reporting
        period

        1. Reports with monetary findings           9              26,883,632           16,128,814          1,431,354
        2. Reports with compliance findings         2                    N/A                  N/A                N/A

C.     Adjustments related to prior
       recommendations                                                  N/A                   N/A          (1,213,927)
     Total of Reports With Cost-Sharing
     Findings (A1+A2+B1+B2)                        32              76,629,791          42,985,021           1,856,714

D.     For which a management decision
       was made during the reporting period

       1. Dollar value of cost-sharing short-
          fall that grantee agrees to provide      11              52,461,118         24,432,394               51,845
       2. Dollar value of cost-sharing short-
          fall that management waives               4                         0                 0            207,559
       3.   Compliance recommendations with
            which management agreed                 2                   N/A                   N/A                  N/A
       4.   Compliance recommendation
            with which management disagreed         0                   N/A                   N/A                  N/A

E.     For which no management decision has
       been made by the end of the reporting
       period

       1. Reports with monetary findings           13              24,168,673           18,552,627          1,597,310
       2. Reports with compliance findings          2                   N/A                   N/A                  N/A



 NSF OIG Semiannual Report                                35                                          March 1999
STATUS OF SYSTEMIC RECOMMENDATIONS
THAT INVOLVE INTERNAL NSF MANAGEMENT

Open Recommendations
         Recommendations Open at the Beginning
         of the Reporting Period                                                        11
         New Recommendations Made During
         Reporting Period                                                               19

         Total Recommendations to be Addressed                                          30


Management Resolution of Recommendations1
         Awaiting Resolution                                                            21
         Resolved Consistent With OIG Recommendations                                    9


Management Decision That No Action is Required                                            0


Final Action on OIG Recommendations
         Final Action Completed                                                          7
         Recommendations Open at End of Period                                          23


Aging of Open Recommendations
         Awaiting Management Resolution:
                0 through 6 Months                                                      16
                7 through 12 Months                                                      5
                more than 12 Months                                                      0


Awaiting Final Action After Resolution2
                  0 through 6 Months                                                      1
                  7 through 12 Months                                                     0
                  13 through 18 Months                                                    1


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



NSF OIG Semiannual Report                                   36                                             March 1999
                                 LIST OF REPORTS
                       NSF and CPA Performed Reviews
Report                                    Questioned     Unsupported   Better Use Cost Sharing
Number                 Subject            Costs          Costs         of Funds        At-Risk


99-1001        State Board                     8,908               0           0            0
99-1002        University                    176,475          51,897           0    1,301,728
99-1004        Public School System           54,841               0           0    3,208,703
99-1005        Society                        32,904          28,220           0            0
99-1006        City School System            319,548         279,487           0            0
99-1007        University                    700,337         541,308           0    2,279,762
99-1008        Space Institute               609,840               0           0      113,894
99-1010        Research Institute             20,402               0           0            0
99-1011        Telecommunications Co.        193,418          68,880           0            0
99-1012        School                         59,709               0           0            0
99-1013        State Dept. of Education      110,328               0           0            0
99-1014        Contractor                          0               0      64,857            0
99-1015        State Dept. of Education      863,027          93,344           0    8,598,204
99-1016        Museum                        332,737         193,607           0      626,523
99-1018        Research Center                     0               0           0            0
99-1019        Research Center                     0               0     200,000            0
99-1020        Research Center                     0               0   2,400,000            0
99-1021        College                        80,280          28,907           0            0
99-1022        State Dept. of Education       40,068               0           0            0
99-1023        Institute                      17,740               0           0            0
99-1024        University                    452,619               0           0            0
99-2001        Office of Polar Programs            0               0     401,000            0
99-2002        SBIR Awards                         0               0           0            0
99-2003        Review Vendor Training
               Request Process                      0             0            0                0
99-2004        Report on FY 98
               Financial Statements                 0             0            0                0
99-2005        FY 98 Management
               Letter Report                         0            0            0                0
99-2006        SBIR Companies                        0            0            0                0
99-6001        State Univ. Foundation                0            0            0                0
99-6002        NSF Program                      42,848            0            0                0
99-6003        Association                           0            0            0                0
99-6004        Center                                0            0            0                0
99-6005        Research Centers                      0            0            0                0
99-6006        State University                  6,119            0       40,687                0

               Total                       4,122,148       1,285,650   3,106,544   16,128,814
NSF OIG Semiannual Report                  37                                      March 1999
LIST OF REPORTS

                             NSF-Cognizant Reports


Report                               Questioned   Unsupported   Cost Sharing
Number         Subject               Costs        Costs         At-Risk


99-4001        Society                   0            0             0
99-4002        Institute                 0            0             0
99-4003        Institute                 0            0             0
99-4004        Company                   0            0             0
99-4005        Association               0            0             0
99-4006        Society                   0            0             0
99-4007        Botanical Garden          0            0             0
99-4009        Foundation                0            0             0


               Total                     0            0             0



                            Other Federal Audits

Report                               Questioned   Unsupported
Number         Subject               Costs        Costs

99-5001        School District           48,471       0
99-5003        Engineering Program       10,092       0
99-5007        Laboratory                 3,130       0
99-5010        Institute                  1,959       0
99-5015        State                      9,488       0
99-5018        College                   27,585       0
99-5021        University                15,597       0
99-5025        Research Foundation       41,835       0
99-5029        State                     69,348       0


               Total                    227,505       0

NSF OIG Semiannual Report                38                     March 1999
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 report-
ing period, there were 10 audit reports with questioned costs, 2 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 36 .



Report                                                         Date Report             Dollar
Number                              Title                      Issued                  Value         Status

Items Involving Questioned Costs
97-1004          Public School System                         02/04/97                 130,996          1
97-2105          FFRDC Contracts                              03/31/97                 641,129          3
98-1004          Public School System                         12/17/97                 225,938          1
98-1006          Board of Education                           12/18/97                2,071,176         1
98-1008          Science Museum                               01/28/98                    5,534         1
98-1016          Technical Institute                          03/31/98                 109,887          1
98-1018          Company                                      03/31/98                 705,125          1
98-1019          State Dept. of Education                     03/31/98                1,099,207         1
98-1024          School District                              05/04/98                   62,762         1
98-1028          College                                      07/22/98                   54,406         1


                 Total                                                               5,106,160


Items Involving Funds Put to Better Use
98-1008          Science Museum                               01/28/98                  87,000          1
98-2107          Antarctic Flight Operations                  09/30/98                3,206,500         1



                 Total                                                               3,293,500



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                               39                                        March 1999
AUDIT REPORTS WITH OUTSTANDING
MANAGEMENT DECISIONS

Report                                                        Date Report             Dollar
Number                    Title                               Issued                  Value        Status


Items Involving Cost Sharing at Risk

98-1006          Board of Education                           12/18/97                  366,611         2
98-1018          Company                                      03/31/98                8,987,733         2
98-1024          School District                              05/04/98                1,067,673         2
98-1031          Engineering Center                           08/13/98                  600,000         2


                 Total                                                               11,022,017


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                                   40                                    March 1999
INVESTIGATIVE ACTIVITY AND STATISTICS


I nvestigative Activity                                             Investigative Statistics

Active Cases From Previous                                           New Referrals                                 2
Reporting Period                           47
                                                                     Referrals From Previous
New Allegations                            14                        Reporting Period                              9

Total Cases                                61                        Prosecutorial Declinations                    2

Cases Closed After                                                   Indictments (including
Preliminary Assessments                    4                         criminal complaints)                          0

Cases Closed After                                                   Criminal Convictions/Pleas                    2
Inquiry/Investigation                      26
                                                                     Civil Settlements                             1
Total Cases Closed                         30
                                                                     Civil Complaints                              1
Active Cases                               31
                                                                     Administrative Actions                        5


                                                                     Investigative Recoveries*           $149,708




 *Investigative recoveries comprise civil penalties and criminal fines and restitutions as well as specific cost
  savings for the government.




NSF OIG Semiannual Report                            41                                                March 1999
MISCONDUCT CASE ACTIVITY AND
ASSURANCE/CERTIFICATIONS RECEIVED


                                              Misconduct Case Activity


                                                                     FY 1998                                 FY 1999
                                                                     Last Half                               First Half

Active Cases From Prior Period                                            58                                       53
Received During Period                                                    15                                       35
Closed Out During Period                                                  20                                       33
In-Process at End of Period                                               53                                       55

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

Cases Reported in Prior Periods With No
Adjudication by the Office of the Director                                  3*                                       1**




*Two of these cases are described in our September 1997 Semiannual Report, pages 36 through 39 , and in our March 1998
  Semiannual Report, pages 27 and 28 .

**This case is described in our S eptember 1998 Semiannual Report, pages 16 and 17 .




                                 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
Number of Debarments in Effect at the End of Period                                                3



*NSF accompanies some findings of misconduct in science with a certification and/or assurance requirement. For a specified
period, the subject must confidentially submit to the Associate Inspector General for Scientific Integrity 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                                          42                                                   March 1999
GLOSSARY
Funds to be Put to Better Use

       Funds the Office of Inspector General has identified in an audit recommendation that
could be used more efficiently by reducing outlays, deobligating funds, avoiding unnecessary
expenditures, or taking other efficiency measures.


  1998
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’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.




NSF OIG Semiannual Report                      43                                          March 1999
      For more information write

       Office of Inspector General
      National Science Foundation
   4201 Wilson Boulevard, Suite 1135
          Arlington, VA 22230

                  call

            (703) 306-2100

           visit our web site

www.nsf.gov/cgi-bin/getpub?oigmarch1999

              or use our
        electronic mail hotline

             oig@nsf.gov
Semiannual
Report
to the
Congress

    IG
National Science Foundation   MARCH 1999