oversight

Semiannual Report - March 2007

Published by the National Science Foundation, Office of Inspector General on 2007-03-01.

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

About

The National Science Foundation...

The National Science Foundation (NSF) is charged with supporting and strengthening all
research discplines, and providing leadership across the broad and expanding frontiers of sci-
ence and engineering knowledge. It is governed by the National Science Board which sets
agency policies and provides oversight of its activities.


NSF invests approximately $5 billion per year in a portfolio of approximately 35,000 research
and education projects in science and engineering, and is responsible for the establishment of
an information base for science and engineering appropriate for development of national and
international policy. Over time other responsibilities have been added including fostering and
supporting the development and use of computers and other scientific methods and
technologies; providing Antarctic research, facilities and logistic support; and addressing
issues of equal opportunity in science and engineering.


And The Office of the Inspector General...

NSF's Office of the Inspector General promotes economy , efficiency, and effectiveness in
administering the Foundation's programs; detects and prevents fraud, waste, and abuse within
the NSF or by individuals that recieve NSF funding; and identifies and helps to resolve cases
of misconduct in science. The OIG was established in 1989, in compliance with the lnspector
General Act of 1978, as amended. Because the Inspector General reports directly to the
National Science Board and Congress, the Office is organizationally independent from
the agency.


About the Cover...

Front: A Coast Guard Icebreaker approaches the Antarctic coastline.
Back: The northern edge of a giant iceberg in the Ross Sea, Antarctica.
Photo by Josh Landis, NSF
                                                                    Table of Contents
OIG Management Activities..................................................... 5

        Legal Review.................................................................................... 5
        Outreach........................................................................................... 6

Audits & Reviews....................................................................11

        Significant Reports..........................................................................11
        Audit Resolution............................................................................. 23
        Work in Progress............................................................................ 25
        A-133 Audit Reports....................................................................... 26

Investigations........................................................................ 29

        Civil and Criminal Investigations..................................................... 29
        Administrative Investigations.......................................................... 33

OIG Performance Report....................................................... 39

Statistical Data........................................................................53

Appendicies............................................................................63
                 From the Inspector General

This report highlights the activities of the National Science Foundation (NSF)
Office of Inspector General (OIG) for the six months ending March 31, 2007.
Our office issued 18 audit reports and reviews that identified $3,617,631 in ques-
tioned costs. We also closed 18 civil/criminal cases and 36 administrative cases,
while recovering $783,989 in government funds. More about OIG’s accomplish-
ments can be found in our annual Performance Report on p. 39.

Longstanding issues associated with audit resolution continued to be problems dur-
ing this reporting period. On page 11 we report that NSF received an
unqualified opinion on its FY 2006 financial statement audit but was again cited
for two reportable conditions related to agency oversight of its awards and contracts.
On pages 14-16 we summarize the most recent audits of NSF’s polar support
contractor. Previous audits of this contractor resulted in questioned costs of
approximately $55 million, which have not yet been resolved. We are confident
that the agency understands the importance of these critical issues, and we continue
to work closely with management to expedite their resolution.

Our office has long expressed concerns about the way awardees administer cost
sharing, in which the institutions commit to providing resources to supplement
NSF awards. While federal guidelines require that cost-shared expenses be
accounted for in the same manner as federal expenditures, many awardees do not
effectively document or substantiate the value of cost-shared expenditures, raising
questions about whether required contributions are actually being made. Since the
National Science Board voted in October 2004 to eliminate program-specific
cost-sharing requirements, new commitments have declined. However the
dministrative problems associated with continuing awards that include cost sharing
have not abated. As the Board examines the impacts and unintended consequences
of the new cost sharing policy over the coming months, I hope these issues will be
part of the discussion. We stand ready to assist the Board in addressing this matter.

Finally, in early May, I was honored to be appointed by the OMB Deputy Director
as the Vice-Chair of the Executive Council on Integrity and Efficiency, a commit-
tee of 33 inspectors general appointed by the heads of their respective agencies. As
NSF’s IG, I have been an active member of the ECIE for over seven years and have
found that many of the challenges our office faces are common to all OIGs and can
be best addressed through discussion and coordination with our colleagues. I look
forward to serving the federal inspector general community in this new role.




                                                           Christine C. Boesz, Dr.P.H.
                                                                     Inspector General
                                                                         May 11, 2007
                               OIG Management Activities

Legal Review
The Inspector General Act of 1978, as amended, mandates
that our office monitor and review legislative and regula-
tory proposals for their impact on the Office of Inspector
General (OIG) and the National Science Foundation’s
(NSF) programs and operations. We perform these tasks
for the purpose of providing leadership in activities that are
designed to promote economy, effectiveness, efficiency,
and the prevention of fraud, waste, abuse, and mismanage-
ment. We also keep Congress and NSF management
informed of problems and monitor legal issues that have
a broad effect on the Inspector General community. The
following legislation merits discussion in this section.

Program Fraud Civil Remedies Act of 1986 (PFCRA)

We support a legislative initiative to amend PFCRA to
include NSF and the 26 other agencies that are cur-
rently excluded from participation under the Act’s
enforcement provisions. PFCRA enables agencies
to fully implement their statutory mission to prevent
fraud, waste and abuse by availing themselves of the
enforcement capabilities contained within the Act.

PFCRA sets forth administrative procedures that ad-
dress allegations of program fraud when the claims are
less than $150,000. Currently, the U.S. Postal Service
and the executive departments identified in the Inspector
General Act of 1978 are the only agencies permitted to
use PFCRA. NSF and the other agencies with Inspec-
tors General appointed by agency heads (pursuant to
a 1988 amendment to the IG Act) are not included.

We believe that using the enforcement provisions of PF-
CRA will enhance NSF and other agency recoveries in                      HIGHLIGHTS
instances of fraud that fall below PFCRA’s jurisdictional
threshold of $150,000. In a March 2006 letter to Congress,
the National Science Board formally requested “that Con-
gress amend the PFCRA to include NSF,” and provide                   Legal Review		   5
the agency with its investigative resolution authorities.
                                                                     Outreach		       6




                                                                 
OIG Management


                 Outreach
                 During this semiannual period NSF OIG continued to engage in outreach
                 to NSF, other federal agencies and their OIGs, and the national and inter-
                 national research communities. Our office has long been a proponent for
                 the need to establish compliance programs at research institutions that rely
                 on government funds for support. When invited to speak to the research
                 community at conferences, workshops, and meetings, we use the oppor-
                 tunity to explain components of such programs to our colleagues and to
                 demonstrate their value. Interest in this message has grown, especially at
                 the university level. Responding to the public’s expectations of increased
                 institutional accountability that is reflected in the well-reported ramifica-
                 tions of incidents of university misconduct, university leaders and research
                 administrators are actively developing programs to ensure compliance
                 with legal and regulatory requirements as well as ethical expectations.

                 Our outreach activities are intended to inform and educate the research
                 community about all aspects of our mission of prevention and detection
                 of fraud, waste, and abuse. But when speaking to institutions, our mes-
                 sage is more concise: compliance systems and programs can effectively
                 address perceived risk, achieve technical compliance with federal require-
                 ments, enhance the research enterprise, and contribute to success.

                 Working with the Federal Community

                 Dr. Boesz appointed Vice-Chair of ECIE. In early May, Dr. Christine C.
                 Boesz, the National Science Foundation Inspector General was appointed
                 Vice Chair of the Executive Committee for Integrity and Efficiency (ECIE).
                 The ECIE was established in 1992 by Executive Order 12805 to coordinate
                 and enhance governmental efforts to promote integrity and efficiency and
                 to detect and prevent fraud, waste, and abuse in Federal programs. The
                 Deputy Director for Management of the Office of Management and Budget
                 serves as Chair of the ECIE and its membership includes 33 Inspectors
                 General that were appointed by the head of their respective agencies.

                 The mission of the ECIE is to 1) address integrity, economy, and effective-
                 ness issues that transcend individual Government agencies, and 2) increase
                 the professionalism and effectiveness of IG personnel throughout the Gov-
                 ernment. To accomplish their mission, ECIE members conduct interagency
                 and inter-entity audit, inspection, and investigation projects to promote econ-
                 omy and efficiency in Federal programs and operations and address more
                 effectively government-wide issues of fraud, waste, and abuse. The Council
                 members also develop policies, standards, and approaches to aid in the es-
                 tablishment of a well-trained and highly skilled IG workforce. Dr. Boesz suc-
                 ceeds Barry Snyder, the Inspector General of the Federal Reserve Board.




            
                                                            OIG Semiannual Report   March 2007


The Inspector General also serves as Chair of the PCIE/ECIE Mis-
conduct in Research Working Group, charged with coordinating ef-
forts within the IG community to improve their capability of identifying,
investigating, and preventing research misconduct. NSF OIG contin-
ued to participate in the PCIE Inspections and Evaluation Committee,
the PCIE/ECIE Computer Forensics Working Group, and the PCIE
GPRA Roundtable, as well as provide training at the Inspector Gen-
eral Academy and the Federal Law Enforcement Training Center.


Investigators contribute expertise. Working within the federal Inspector
General community offers numerous opportunities for formal and informal
training and information sharing. During this semiannual period, NSF OIG
investigators interacted with their counterparts in the IG community in a
number of capacities. We continue to serve as the facilitators for the ECIE
investigative peer review effort, and are planning a meeting in this next
period, in addition we
serve on the PCIE/
ECIE committee
convened to review
and revise the Quali-
tative Assessment
Review Guidelines for
conducting Investiga-
tive peer reviews.
For example, we are
active in the Grant
Fraud Subcommittee
of the Department
                                                                                    The Office of Audits
of Justice National Procurement Fraud Task Force, in which we contrib-              hosted a workshop for
uted to: 1) the development of a basic core curriculum for grant fraud              visiting officials from
investigations; 2) the creation of effective outreach tools for the grant           the NSF of China.
community; and 3) the enhancement of federal certification standards.               Jannifer Jenkins, Arnie
                                                                                    Garza (left) and Dr.
We also participated in the Regional Procurement Fraud Working Group,               Boesz (center) pose
hosted by the United States Attorney’s Office for the Eastern District              with workshop
of Virginia.                                                                        participants.


Due to the nature of our work and our experience in grant fraud and
research misconduct investigations, we are frequently invited to con-
tribute to training events for others within the IG community or to
participate in curriculum reviews or planning meetings. During this
semiannual period, we conducted our Fifth Annual Grant Fraud In-
vestigations Training Program. Over 140 investigators, representing
30 federal, state, and local agencies, participated in this event. The
response to this training has been overwhelmingly positive and we are
now identifying a larger facility in which to hold next year’s training.



                                                                                    
     OIG Management


                         Auditors serve on financial committees. OIG auditors continued to
                         actively participate in the Federal Audit Executive Council (FAEC), which
                         is sponsored by the IG community to discuss and coordinate audit policy
                         and operations government-wide. Auditors met monthly with the Finan-
                         cial Statement Audit Network, a working group of one of FAEC’s standing
                         committees, volunteered to help develop guidance to IG offices on audit-
                         ing agency controls over financial reporting, and worked with other OIGs
                         to survey the community about human resource and training needs. In
                         addition, auditors participated in updating the GAO/PCIE Financial Audit
                         Manual, which helps ensure that financial statement audits of federal
                         agencies are consistent, of high quality, and efficiently performed.


                         Working with the Research Community

                         OIG staff participate in conferences. The wide range of workshops,
                         conferences, and other events sponsored by institutions and associa-
                         tions of research professionals offered valuable opportunities for OIG
                         staff members to communicate our message. We were invited to at-
                         tend a broad array of such events and presented to the international,
                         state, and regional chapters of the Society of Research Administrators
Dr. Fischer and Dr.
Boesz pose with fellow
                         International (SRAI), to NSF’s Small Business Innovation Research
representatives to the   grant recipients, and to NSF’s Regional Grant Recipients Seminars.
Global Science Forum
meetings in Tokyo.
                         International activities. We participated in international forums convened
                                                   to discuss the issues of how to most effectively
                                                   address research misconduct and what role
                                                   the various stakeholders should play in the pro-
                                                   cess. Participants in each of these international
                                                   events were anxious to share information and
                                                   discuss how best to foster effective research
                                                   integrity programs. OIG staff participated in
                                                   events with colleagues from the Scientific and
                                                   Technological Research Council of Turkey; the
                                                   Turkish Academy of Sciences; the Standing
                                                   Committee for Social Sciences of the European
                                                   Science Foundation; the Swedish Research
                                                   Council; and Uppsala University of Sweden.

                         The Inspector General participated as the U.S. Representative in the de-
                         liberations on research misconduct and research integrity of the Global
                         Science Forum (GSF) held in Tokyo on February 22-23. The GSF is
                         part of the Organization for Economic Cooperation and Development
                         comprising 30 full member nations. The meetings were designated a
                         Workshop on Best Practices for Ensuring Scientific Integrity and Prevent-
                         ing Misconduct, and Dr. Boesz presented on how research misconduct
                         investigations are handled within the U.S. The meetings resulted in a

                     
                                                           OIG Semiannual Report   March 2007


consensus statement to be voted on for adoption at the next GSF meet-
ing. While in Japan, the IG also met separately with the Director General
of the Science and Technology Policy Bureau of Japan’s Ministry of
Education, Culture, Sports, Science and Technology (MEXT) and other
accountability officials who wanted to learn more about the U.S. approach.

Meetings with our counterparts from other countries, provide oppor-
tunities to address how best to advance our common goal of ensur-
ing integrity in the operation of the research enterprise, and assist
individuals and organizations in their efforts to create systems and
tools to identify, resolve, and prevent research misconduct or misman-
agement. Consequently, these meetings promote an environment
of ethical conduct in scientific research and grant administration.

OIG staff present at universities. Members of the NSF OIG provided
presentations at 10 universities to inform, and answer questions from
university officers and others involved in applying for or administering
NSF awards, performing supported research, or conducting university-
level inquiries into allegations of research misconduct. Our audiences
varied greatly in size and composition. We presented to students, uni-
versity research administrators, and faculty on a variety of topics includ-
ing ethical conduct in research, lessons learned from case studies, and
techniques for successful research misconduct inquiries and investiga-
tions. These presentations are supplemented by fact sheets, brochures,
posters, and other outreach material designed to make the most of
each opportunity to engage the community and make an impression.


Working with NSF

Our work within NSF continues to advance the Inspector General’s goal of
maximizing the frequency and effectiveness of communications between
OIG personnel and agency personnel. We took advantage of the oppor-
tunity to address each of the bi-monthly NSF Conflict-of-Interests briefings
to communicate directly to the majority of NSF employees, and explain the
OIG mission and responsibilities, our ongoing liaison program with NSF, and
the channels through which employees can bring matters to our attention.

OIG staff participated as resource personnel in the NSF Program Man-
agers’ Seminars, which provide new NSF staff with detailed information
about the Foundation and its activities. These sessions provided OIG
staff an opportunity to develop personal and professional relation-
ships with their NSF colleagues and to learn about new developments
within NSF program management, while at the same time educating
agency staff about the mission and responsibilities of NSF OIG.




                                                                                   
OIG Management


                 Our liaison program built on our prior success in establishing and main-
                 taining effective communication and professional relationships with the
                 individual directorates and offices within NSF. Liaison staff held 30
                 meetings this semiannual period, in which they solicited suggestions
                 from the directorates and offices regarding issues they considered ap-
                 propriate for OIG review, and discussed other issues of mutual interest.




           10
                                            Audits         & Reviews
Significant Reports
Financial Statement Audit Reports and
Review of Information Systems

Establishing and maintaining sound financial management
is a top priority for the federal government because agen-
cies need accurate and timely information to make decisions
about budget, policy, and operations. Information security is
also critically important as unauthorized access to information
systems can compromise agencies’ abilities to fulfill their mis-
sions and protect sensitive information. To evaluate financial
management and information security, Congress has enacted
the Chief Financial Officer’s (CFO) Act and the Federal Infor-
mation Security Management Act (FISMA) respectively. The
CFO Act, as amended, requires agencies to prepare annual
financial statements and the agency OIG, or an independent
public accounting firm selected by the OIG, to audit these
statements. FISMA requires an independent evaluation of
agencies’ controls over information security.


FY 2006 Independent Auditors Issue Unqualified
Opinion; Continue to Cite Need for Improved
Post-Award and Contract Oversight

During this reporting period we completed the required CFO
audit for fiscal year (FY) 2006. Under a contract with OIG,
Clifton Gunderson LLP conducted an audit of NSF’s financial
statements for FY 2006. The auditors issued an unqualified
opinion but repeated both reportable conditions from prior
years’ audits related to NSF’s post-award oversight for high
risk grants and contract monitoring.                                     HIGHLIGHTS
                                                                    Significant Reports	   11
In FY 2006, NSF expended approximately $4.9 billion in
grants and cooperative agreements and approximately $550            Audit Resolution	      23
million on active contracts and interagency agreements.
As such, it is important that NSF oversee these grants and
                                                                    Work in Progress	      25	
contracts to ensure that federal funds are properly spent on
allowable costs benefiting NSF’s research activities, and that
contractors use federal funds consistent with the objectives        A-133 Audit Reports 26

                                                                   11
Audits & Reviews


                   of the contracts. In FY 2006, NSF made progress in addressing prior post-
                   award monitoring recommendations by initiating some new procedures, such
                   as hiring a contractor to perform desk reviews of certain high risk awards.
                   However, the auditors reported that additional improvements are still needed,
                   as $2.7 billion of $3.2 billion (84%) of high risk awards did not receive a site
                   visit or desk review during FY 2006. Specifically, Clifton Gunderson recom-
                   mended that NSF: (1) complete the desk review program implemented for
                   high risk awards and evaluate the benefit and effectiveness of such reviews;
                   (2) refine the factors in the risk assessment model used to select high risk
                   awards for desk review or site visits; (3) expand the review coverage to
                   include testing of federal cash transactions for high risk awards that were
                   excluded from other NSF reviews for that fiscal year; and (4) revise standard
                   operating guidance for planning and scheduling reviews for large facilities.

                   Clifton Gunderson also reported that NSF did not have a comprehensive,
                   risk-based system in place to oversee and monitor its contracts. The audi-
                   tors recommended that NSF: (1) expand the Contracts Manual to include
                   specific policies and procedures for identifying and managing high risk con-
                   tracts; (2) continue to perform Quarterly Expenditure Report reviews of its
                   largest contractors and follow up on the findings and recommendations in the
                   OIG cost-incurred reports issued from FY 2000 forward; and (3) maintain an
                   electronic copy of key source documentation used to support the property,
                   plant, and equipment activity and balances in NSF’s financial statements.

                   In January, NSF submitted its proposed action plans to address the recom-
                   mendation related to these reportable conditions. The proposed correc-
                   tive actions were reasonable and generally responsive to all but two of the
                   contract monitoring recommendations. The OIG and Clifton Gunderson will
                   continue working with NSF management to ensure that these issues are
                   resolved timely.

                   Management Letter Also Cites Need for Improved Post
                   Award and Contract Monitoring Practices

                   The FY 2006 Management Letter identified eight findings, some of which
                   incorporated elements of prior years’ findings related to NSF’s operations
                   and financial reporting controls.1 The Management Letter reported continu-
                   ing weaknesses in NSF’s grants and contracts monitoring programs. For
                   example, the auditors found missing or late grantee annual project reports,
                   late final project reports, and incomplete documentation in NSF’s monitoring
                   files to evidence the extent and results of its oversight reviews. The auditors
                   recommended that NSF revise its Site Visit Review Guide to provide specific
                   guidance for reviews and for documenting the review steps, results, and clo-


                   1
                    Auditors issue a management letter to separately communicate findings arising from the finan-
                   cial statement audit that are not reported in the audit report but are still important to ensuring a
                   sound overall internal control structure and require management’s attention.

             12
                                                           OIG Semiannual Report   March 2007


sure of recommendations. Further, the auditors found that NSF did not fully
document its contract monitoring activities and needs to provide training to
all employees responsible for accepting services and/or goods.

The Management Letter repeated three findings, including two findings
originally included in the FY 2004 Management Letter on post-retirement
liabilities and environmental clean-up costs. The Letter recommended that
NSF seek guidance from the Federal Accounting Standards Advisory Board
(FASAB) on how to account for post retirement benefits at Federally Funded
Research and Development Centers (FFRDCs) that it wholly supports. In
one case, neither NSF nor the FFRDC reported this liability on its financial
statements. FASAB’s guidance is necessary to ensure that the entity re-
sponsible for this liability is correctly recognizing, recording, and reporting
it. The Letter also reported that NSF needs to clarify its responsibilities for
environmental clean-up costs in the Antarctic. Although the treaty that gov-
erns NSF’s responsibilities in the Antarctic states that NSF has responsibility
for remediation of environmental incidents, it does not appear to provide for
concomitant liability. To ensure that NSF prepares accurate financial state-
ments, the auditors recommended that NSF seek guidance from FASAB
on how to account for clean-up costs for which NSF has an obligation and
responsibility, but no apparent legal liability.

NSF management generally concurred with a number of the recommenda-
tions in the Management Letter. In some instances NSF is developing alter-
native approaches to resolve the findings. The FY 2007 financial statement
audit will evaluate NSF’s actions in response to the findings and recommen-
dations to determine whether it has resolved these issues.

FY 2006 FISMA Report Affirms NSF Security Program but
Identifies Needed Improvements

FISMA requires agencies to adopt a risk-based approach to improving
computer security that includes annual security program reviews and an
independent evaluation by the Inspector General. Under a contract with the
OIG, Clifton Gunderson conducted this independent evaluation for FY 2006.
Clifton Gunderson reported that NSF has an established information security
program and has been proactive in reviewing its internal security controls
and identifying areas that should be strengthened. NSF also corrected five
of the eight findings reported in the prior year’s Independent Evaluation Re-
port. However, the auditors reported three new findings relating to a general
support system, disaster recovery, and access controls. These weaknesses
pose a considerable risk to NSF and should be addressed promptly. NSF
management provided a corrective action plan for the recommendations and
Clifton Gunderson will review implementation of these corrective actions as
part of its FY 2007 independent evaluation.



                                                                                   13
Audits & Reviews


                   Contract Audits
                   Polar Support Contractor Continues to Have Compliance
                   Problems

                   Beginning with our September 2004 Semiannual Report,2 we have reported
                   on a number of audits of NSF’s largest contractor, Raytheon Polar Ser-
                   vices Company (RPSC). These audits questioned about $55.5 million of
                   claimed costs and cited RPSC’s parent, Raytheon Technical Services Com-
                   pany (Raytheon) for failing to comply with its federally disclosed accounting
                   practices, subsequently removing RPSC from Raytheon’s disclosure state-
                   ment. These audits also identified a number of internal control deficiencies
                   in RPSC’s method for identifying indirect vs. direct costs, its New Zealand
                   operations, and its billing, financial, project, and subcontract management
                   systems. This semiannual period we reported that if RPSC is allowed to
                   continue its practice of charging indirect costs as direct costs, contrary to its
                   certified accounting practices in the NSF contract, NSF could incur an ad-
                   ditional $26.6 million of costs for the remaining contract period 2005 through
                   2010.

                   We also previously reported that RPSC needs to improve its subaward moni-
                   toring and assess the risks that its subcontractors can accurately record and
                   bill its subcontract costs. In this period two audits of an RPSC subcontractor,
                   Agencias Universales S. A. (AGUNSA), were completed. The auditors found
                   significant internal control deficiencies, which enabled AGUNSA employees
                   to embezzle $157,000, including $7,200 related to the RPSC contract. If
                   not corrected, these deficiencies could adversely affect AGUNSA’s ability to
                   effectively administer its ongoing financial activities under the RPSC subcon-
                   tract.

                   RPSC’s Proposed Disclosure Statement Revision Drives Es-
                   timated Costs Requiring Resolution to $82.6 Million

                   RPSC spends approximately $110 million annually to provide science, op-
                   erations and maintenance support to sustain year-round research in NSF’s
                   United States Antarctic Program (USAP). Raytheon is required to file a Cost
                   Accounting Standards Board (CASB) disclosure statement with the Depart-
                   ment of Defense (DoD) to inform the government how it will bill its direct and
                   indirect costs so that its indirect costs (i.e., overhead management costs) are
                   charged to its government contracts on a consistent and equitable basis. Of
                   the $55.5 million of previously questioned costs, about $36.2 million, or 65
                   percent, were due to the contractor’s failure to follow its written disclosure
                   statement, resulting in RPSC exceeding its contractual indirect cost ceilings.



                   2
                       September 2004 Semiannual Report, pp. 15-16.

             14
                                                                          OIG Semiannual Report   March 2007


During this semiannual period, DoD, which is responsible for overseeing
Raytheon’s compliance with its disclosure statement, made an initial finding
of noncompliance with Raytheon’s disclosed accounting practices for fiscal
years 2003 and 2004. This followed a final determination of noncompliance
that DoD made last year citing Raytheon with not adhering to its disclosed
accounting practices for fiscal years 2000 to 2002.

In April 2006 Raytheon proposed to correct this noncompliance for the
remaining five years of the contract by submitting a unique CASB disclosure
statement for its Polar Services business unit retroactive to January 1 2005.
Raytheon’s proposed change in its disclosed accounting practices was to
classify and bill indirect management costs for its Centennial, Colorado office
as direct costs. Also, the Defense Contract Audit Agency’s (DCAA) audit
of the revised CASB disclosure statement identified nine deficiencies and
concluded that the disclosure statement was not acceptable because it did
not adequately describe RPSC’s cost accounting practices used on the NSF
contract. The auditors recommended that RPSC submit a revised disclosure
statement that corrects each deficiency. RPSC just submitted its revised
disclosure statement in February 2007.

Further, RPSC did not submit a cost impact analysis to explain the financial
impact of its proposed change in disclosed accounting practices on the re-
maining five years of the NSF contract. This prompted the OIG to request a
cost impact analysis from DCAA, which was completed during this reporting
period. The DCAA auditors projected that, if accepted by NSF, the proposed
changes in the revised disclosure statement would increase costs charged
to NSF by an additional $26.6 million over the five years 2005 to 2010. This
amount would, in turn, raise RPSC’s total questioned and estimated in-
creased costs to $82.6 million.3

We recommended that, for the 2000 through 2004 contract period, NSF co-
ordinate with DoD to resolve the disclosed accounting practice deficiencies
and the questioned $36.2 million of indirect costs. We also recommended
that NSF resolve the remaining $19.8 million in questioned costs, including
$12.2 million of costs claimed in excess of contractual indirect cost ceilings
and $7.6 million of improperly claimed other direct costs and fringe benefits.
For the 2005 through 2010 contract period, we recommended that NSF also
work with DoD to assess the desirability of RPSC’s proposed change in dis-
closed accounting practices in light of the $26.6 million of increased contract
costs.

To address these recommendations and those in the nine prior audit reports
on this contract over the past two and one-half years, NSF has drafted a cor-
rective action plan, which we are currently reviewing and discussing with the
agency.

3
 The $82.6 million includes not only the $26.6 million but also $560,376 of RPSC fringe benefit
costs questioned in DCAA audits this semiannual period.

                                                                                                  15
Audits & Reviews


                   Funds Embezzled at Polar Subcontractor

                   AGUNSA, as an RPSC subcontractor, provides ship chandlery duties and
                   technical support in Punta Arenas, Chile for the US Antarctic Program. From
                   January 1, 2002 through June 30, 2003, two AGUNSA employees
                   embezzled approximately $157,000 of company funds, including approxi-
                   mately $7,200 related to AGUNSA’s subcontract with RPSC. Although
                   AGUNSA reimbursed its vendors when the embezzlement was discovered,
                   as much as $616,000 of NSF funds that RPSC paid to AGUNSA may have
                   been delayed during the course of the embezzlement scheme.

                   At NSF’s request, we reviewed the circumstances of the embezzlement and
                   the adequacy of AGUNSA’s internal controls to properly accumulate, track,
                   and monitor its costs and billings under the RPSC subcontract in compli-
                   ance with federal and NSF requirements. The auditors found that AGUNSA
                   lacked adequate management oversight and internal control over the ac-
                   counting and vendor payment processes, which enabled two individuals in
                   the Punta Arenas Office to divert funds intended to pay vendors. These
                   same individuals also had access to the accounting records in which they
                   falsely recorded payments to vendors that had not been made. The em-
                   bezzlement was discovered when vendors complained about late payments
                   of their invoices.

                   The auditors recommended that NSF direct RPSC to ensure that AGUNSA
                   improves its overall internal control and management structure over its in-
                   voice and payment process. This includes ensuring that AGUNSA’s employ-
                   ees clearly understand their responsibilities to oversee and monitor its ven-
                   dors and to ensure that vendor invoices are properly prepared, authorized,
                   and documented prior to submission of costs to RPSC for reimbursement.

                   In general, AGUNSA agreed with the findings and corrective actions in our
                   report. The report has been submitted to NSF’s Division of Acquisition and
                   Cooperative Support for audit resolution.

                   Audits of NSF Support Contactors
                   Question $634,543 in Costs

                   In further support of NSF’s request for audits to assist in its contract over-
                   sight responsibilities, the OIG contracted with DCAA to perform audits of
                   contracts with Triumph Technologies, Inc., Compuware Corporation, Temple
                   University, and Mathematica Policy Research, Inc., whose total claimed
                   costs amounted to $41 million. Three of the audits questioned $634,543 of
                   about $34 million of claimed costs, and on the fourth audit, over four years
                   we identified minor adjustments to the indirect cost pools and the G&A
                   bases. To prevent future cost overruns we recommended that NSF improve
                   its processes for reviewing contractor invoices and ensure that its contract
                   files are complete and accurate. More information on each audit is present-
                   ed (next page) :
             16
                                                            OIG Semiannual Report   March 2007


   Triumph Technologies. Auditors found that Triumph (NSF’s Small
   Business Innovative Research/Small Technology Transfer Research
   contractor) failed to comply with the indirect rate ceilings in its NSF
   contract, claiming costs in excess of contractual indirect ceiling limitations
   for each of the three years audited, resulting in $79,548 of questioned
   costs. Triumph also did not provide documentation to support $1,192 of
   its claimed subaward costs. As a result, auditors questioned a total of
   $80,740 out of the $1.7 million of costs that Triumph claimed.

   Compuware Corporation. Compuware, in two of its contracts to
   provide information technology support services for NSF over four years,
   incorrectly included some direct costs in the overhead pool and claimed
   unallowable costs that were incurred for gifts, contributions, parties and
   picnics. These errors resulted in $320,418 of questioned costs out of $28
   million in costs claimed.

   Temple University. An audit of $4.8 million in claimed costs on a
   contract with Temple for technical evaluation support for NSF’s Division
   of Research, Evaluation and Communication, identified $233,385
   in questioned costs: $231,838 for award costs claimed in excess of
   the authorized contract ceiling, and $1,547 for unallowable alcoholic
   beverages. NSF exercised a unilateral modification to increase the
   award by $175,000 but failed to sign the award document or provide it to
   Temple. Accordingly, while an additional $175,000 of costs may now be
   allowable, the increase in award funds is insufficient to cover Temple’s
   total claimed costs.

   Mathematica Policy Research (MPR). Out of $6.5 million claimed
   on three contracts awarded to MPR for data and research services in
   support of NSF’s Division of Science Resources Statistics over four
   years, the auditors found $83,226 of unallowable and/or misclassified
   costs in its overhead and G&A expense pools and added $39,795 to
   MPR’S G&A base because of misallocated costs.

Overall, we recommended that NSF establish an internal screening process
to review contractors’ invoices to ensure that ceiling amounts for indirect
costs are not exceeded and that all contract modifications are appropriately
signed and provided to the contractor. We also recommended that NSF
resolve the questioned costs, indirect cost rates, and penalties based on the
results of the audits, and require the contractors to strengthen their internal
controls to prevent similar problems from recurring in the future. Each of
these reports has been provided to NSF’s Division of Acquisition and Coop-
erative Support to ensure that the contractors’ corrective actions adequately
address the report’s recommendations.




                                                                                    17
Audits & Reviews


                   Grant Audits
                   Voluntary Faculty Effort Pledged to Sponsored Projects
                   Goes Unrecorded

                   As previously reported in a prior Semiannual Report,4 the OIG has undertak-
                   en an initiative to assess the adequacy of accounting and reporting process-
                   es for labor costs at a representative sample of NSF’s top-funded institutions.
                   During this reporting period, we audited the accounting records related to
                   labor effort at the California Institute of Technology (Caltech) in Pasadena,
                   California. We found that Caltech generally supported salary costs to NSF
                   but needs to develop a system to provide accurate reporting of voluntary
                   committed cost sharing by faculty members.

                   Our review of 32 sampled employees indicated that Caltech’s labor effort
                   reporting system provided support for most of the $1.6 million of FY 2005
                   salaries charged directly to NSF grants. But three of the five faculty mem-
                   bers who had explicitly pledged in their grant proposals that they would vol-
                   untarily contribute 1 to 20 percent of their labor time on five federal awards
                   did not report any of this time in their labor effort reports. A January 2001
                   OMB clarification memorandum5 required awardees to track and account for
                   faculty research effort voluntarily committed as cost sharing in their labor ef-
                   fort reporting systems. The Memorandum defined voluntary committed labor
                   effort as cost sharing of salary costs that Principal Investigators (PIs) spe-
                   cifically pledge willingly at the university’s expense and is in addition to any
                   mandatory cost sharing required by the agency under the award agreement.

                   Accurate reporting of voluntary committed labor effort is necessary to enable
                   the federal government to assess whether the PIs at Caltech actually de-
                   voted the level of effort promised in their grant proposals. In our sample, the
                   unreported faculty effort was valued at approximately $100,000 or about 20
                   percent of the annual compensation received by the three PIs. In addition,
                   the salary costs associated with unreported faculty effort do not get properly
                   included in Caltech’s organized research base, thereby resulting in greater
                   Caltech indirect costs paid by the federal government. Since Caltech has
                   286 faculty members who may also have omitted reporting their voluntary
                   labor, the monetary impact is potentially significant.

                   In addition, Caltech needs to improve the timeliness of its labor effort dis-
                   tribution and certification process. In FY 2005, Caltech circulated 63 labor
                   reports for the 32 sampled employees an average of 12.5 days after the re-
                   quired 120-day timeframe. We also found that PIs certified 25 percent of the
                   reports from 1 to 47 days after the 30-day required turnaround time. Without
                   timely certification NSF has less assurance that the certifications are reliable
                   4
                    September 2005 Semiannual Report, p. 20.
                   5
                    OMB Memorandum M-01-06, Clarification of OMB A-21 Treatment of Voluntary Uncommitted
                   Cost Sharing and Tuition Reimbursement (January 5, 2001).

             18
                                                            OIG Semiannual Report   March 2007


because PIs must remember as far back as 11 months to confirm employee
activity on sponsored projects.

The weaknesses in Caltech’s labor effort reporting occurred because the
university has not established clear guidance and procedures to ensure that
PI effort voluntarily pledged as cost sharing in federal grant proposals is
properly identified and tracked in the labor report reporting system. There-
fore, we recommended that Caltech develop and implement procedures
that will more accurately report voluntarily contributed faculty labor effort on
sponsored projects, and ensure timely certification of labor effort reports. In
general, Caltech agreed with the audit findings and recommendations but
stated that it already had adequate management processes in place to ad-
dress the issue of timely effort reports. We forwarded the report to NSF’s
Division of Institution and Award Support to work with Caltech’s cognizant
agency to ensure that the University takes adequate corrective action to ad-
dress the report’s findings and recommendations.

Non-Profit Lacks Support for $2.47 Million in Costs

An audit of The American Institute of Mathematics (AIM), a non-profit orga-
nization engaged in expanding mathematical knowledge, found inadequate
internal controls over NSF grant funds. For seven NSF grants with cumula-
tive funding of $6.1 million as of December 31, 2005, AIM did not provide
adequate documentation to support $1.57 million of employee salaries
($1,184,367 of NSF direct costs and $389,900 of claimed cost sharing),
$882,054 of NSF funds passed-through to subawardees and independent
contractors, and $23,531 of travel, participant support, and indirect costs.
In addition, AIM charged almost all of its indirect costs and cost sharing to
one NSF award, had inadequate financial oversight of its subrecipients and
independent contractors, and lacked a financial accounting system that could
ensure accurate, current, and complete disclosure of the financial results of
its NSF awards. The grantee is unique in that NSF is its only federal spon-
sor and that most of the award personnel are not employees of AIM.

The internal control weaknesses and the significant amount of undocument-
ed costs occurred because AIM was not familiar with federal grant require-
ments and lacked written policies and procedures to ensure compliance.
We recommended that AIM establish written policies and procedures and
provide staff training. AIM agreed with most of the recommendations and
we have forwarded the audit report to NSF’s Division of Institution and Award
Support to resolve costs and ensure corrective action.

Community College Failure to Follow Own Internal Control
Procedures Results in $185,213 of Questioned Costs
	
In this semiannual period, we completed the last of a series of audits of NSF
awards to community colleges. This audit of three awards amounting to $2.7

                                                                                    19
Audits & Reviews


                   million to Nashville State Technical Community College, (NSTCC), found that
                   the college did not always adhere to its established policies and procedures
                   to account for NSF funds.

                   NSTCC was not always able to provide adequate documentation for costs
                   charged to its NSF awards. Routine accounting documents such as pur-
                   chase orders, invoices, contracts, and sign-in sheets were not available to
                   support $37,193 of participant support, consultant costs, travel costs and
                   other direct costs. NSTCC also overcharged one award $148,020 for indirect
                   costs because it claimed the budgeted amount of indirect costs instead of
                   applying the NSF approved indirect cost rate to actual salaries and wages.
                   The audit also found that for one ongoing award NSTCC could not provide
                   adequate support for $85,446 or 35% of the $241,528 it had claimed to NSF
                   as cost sharing. In total the auditors questioned $185,213 in costs submit-
                   ted.

                   In addition, NSTCC did not obtain required certifications and personnel activ-
                   ity reports to support $556,016 of salaries, wages, and fringe benefits, or
                   approximately 21 percent of $2.7 million in total costs claimed. The auditors
                   were ultimately able to satisfy themselves of the propriety of the labor costs
                   that NSTCC charged to its NSF awards by performing additional audit pro-
                   cedures. However, NSTCC needs to significantly improve its controls over
                   labor effort reporting to prevent such problems on future awards.

                   The auditors recommended that NSF direct NSTCC to implement proce-
                   dures to verify that all employees working on NSF awards are: 1) completing
                   the required personnel activity reports and obtaining proper review and cer-
                   tification of the reports; 2) trained on NSTCC procedures to review, approve,
                   and maintain all documentation to support direct and cost sharing costs
                   charged to future NSF awards; and 3) claiming indirect costs based on the
                   terms of the NSF award agreements.

                   NSTCC generally agreed with the audit recommendations and indicated that
                   it has initiated corrective action. However, NSTCC disagreed that it lacked
                   appropriate documentation for certain costs charged to its NSF awards and
                   that it did not have adequate documentation to support its cost share. To
                   follow up on our findings and recommendations, we have forwarded the audit
                   report to NSF’s Division of Institution and Award Support.


                   University Needs to Improve Internal Controls Over Sub-
                   award Management

                   An audit of two NSF awards to the University of Puerto Rico – Central Ad-
                   ministration (UPR) with $8.8 million of claimed NSF funds found significant
                   deficiencies in the University’s subaward-monitoring system. Similar findings
                   were also reported in UPR’s Fiscal Year 2003 A-133 Single Audit Report.

             20
                                                            OIG Semiannual Report   March 2007


UPR did not adequately monitor subaward costs or subawardee cost sharing
for one award that included seven subawards amounting to $3.1 million or
58 percent of the total costs charged to the NSF award. The auditors had to
perform additional audit steps at further expense to verify that all but $8,530
of claimed subaward costs were allowable. UPR needs to strengthen its
internal controls over subaward monitoring to ensure that future subaward
costs claimed are allowable and allocable to NSF awards.

To address internal control weakness, we recommended that UPR develop
and implement written policies and procedures to assess and document
each subawardee’s risk of claiming unallocable or unallowable costs and
cost sharing contributions and perform periodic risk-based monitoring re-
views of subawardee costs. UPR generally agreed with the recommenda-
tions and we have forwarded the report to NSF’s Division of Institution and
Award Support to resolve the findings.

Material Weaknesses Found in School District’s Internal
Controls Over NSF Funds

As part of our ongoing review of awardees under NSF’s Urban Systemic
Initiatives/(USI) Urban Systemic Program (USP),6 we audited $26.5 million
in costs and $6 million in cost sharing claimed by the Dallas Independent
School District (DISD) on two awards. The audit identified seven weakness-
es in the District’s internal controls over financial reporting including three
material weaknesses: DISD did not have adequate systems to retain and
retrieve records, track and report the receipt and expenditure of cost sharing,
and account for participant support costs.

Furthermore, DISD destroyed records for the first three years of one of the
two awards audited in violation of NSF requirements that records should be
maintained for three years following the submission of a final project report,
and could not locate 22 out of 232 transactions tested for both awards. The
auditors performed additional audit procedures at government expense and
ultimately questioned only $91,216 of the costs claimed.

DISD did not adequately identify track, and monitor $9.9 million of participant
support costs, out of the $26.5 million of total costs claimed on both awards.
The auditors again found it necessary to perform alternative tests, and ques-
tioned $33,602 of participant support costs. They also found that, participant
support tuition reimbursement checks were returned to the same person who
initiated them, thus creating the opportunity for errors or irregularities to oc-
cur without being detected. The remaining questioned costs totaling $57,614
were for unsupported consultant, materials, supplies, travel, and miscella-
neous expenses.



6
    March 2006 Semiannual Report, pp. 16-17.

                                                                                    21
Audits & Reviews



                   DISD was also required to provide $98.9 million of cost sharing on one
                   award, but did not have policies and procedures in place to accumulate and
                   monitor its actual cost sharing contribution and ensure that required levels
                   were met, even though its accounting system was capable of properly ac-
                   counting for cost share. The auditors did not question any of the $50 million
                   cost sharing shortfall because, after the completion of fieldwork, at DISD’s
                   request, NSF reduced the required amount of cost sharing to $3 million. The
                   auditors verified that DISD had adequate support for the revised amount of
                   required cost sharing.

                   The auditors recommended that the NSF direct DISD to develop and imple-
                   ment a financial management system with policies to effectively administer
                   and monitor NSF funds, and ensure that DISD (1) maintains documentation
                   supporting all award costs; (2) implements accounting processes to sepa-
                   rately identify, track, and report on participant support costs and cost shar-
                   ing; and (3) segregates check disbursement duties. DISD generally agreed
                   with the report recommendations, and we forwarded the report to NSF’s
                   Division of Institution and Award Support to resolve the questioned costs and
                   ensure that corrective actions are responsive to the audit recommendations.
                   We also suggested that NSF flag DISD in its award system until NSF is able
                   to resolve the findings and recommendations and defer closure of the audit
                   recommendations until an adequate corrective action plan has been imple-
                   mented.

                   Performance Audits
                   National Science Board’s Compliance with
                   Sunshine Act Improves

                   During 2006, the National Science Board continued to demonstrate a clear
                   intent to comply with the requirements of the Government in the Sunshine
                   Act. The Board greatly improved its procedural compliance in 2006, having
                   implemented a new process for tracking due dates for publicly announcing
                   meetings. However, the Board could further improve its compliance with the
                   Act by ensuring that it votes on and announces all changes to publicly an-
                   nounced agendas, and by instructing court reporters to fully record all closed
                   meetings.

                   In addition, the Board generally closed meetings only when warranted, con-
                   sistent with the Act’s exemptions. However, in several closed meetings, the
                   Board, and particularly the Executive Committee, continued to include agen-
                   da items that should have been included in open sessions. This occurred
                   because the decision to include agenda items in open or closed sessions is
                   made in advance of the actual meeting. There was insufficient evidence to
                   determine whether the Board properly applied the Sunshine Act’s prospec-
                   tive standard of being likely to reveal information covered by one of the Act’s

             22
                                                             OIG Semiannual Report   March 2007


exemptions when deciding upon closed meeting agenda items. Based on
these findings, we again recommended that the Board develop, implement,
and provide training on a process for documenting the reason for placing
each agenda item in a closed rather than an open meeting. The Board gen-
erally agreed with our recommendations.

Audit Resolution
NSF Takes Steps to Improve Indirect Cost Procedures and
Awardee Accountability Over Grant Funds

NSF has agreed to adopt recommendations contained in two prior audit
reports in which OIG advised the agency to revise its indirect cost recov-
ery policy to conform to federal requirements and continue to improve its
policies for reviewing and negotiating indirect cost rates. Since indirect
costs comprise about 20 percent of NSF’s award costs, it is important
that NSF ensure that awardee institutions correctly apply the indirect cost
rate and that it has accurate and reliable information when it negotiates
indirect cost rates with its awardees. In two additional audit resolutions
completed this period, NSF has taken steps to ensure that Howard Uni-
versity and New Mexico Highlands University have improved their internal
controls, including their management of subawards and cost sharing, on
NSF awards to ensure compliance with federal and NSF requirements.

NSF Revises its Indirect Cost Recovery Procedures
for Universities

NSF is revising its Grant Policy Manual provisions for indirect cost recovery
to conform with federal requirements. A prior audit disclosed that contrary
to the federal requirements, NSF had allowed universities and colleges
to recover indirect costs utilizing rates negotiated after initial awards were
granted.7 As a result, the audit found that 3 of the 23 universities reviewed
had used newly negotiated indirect cost rates that resulted in $1.9 million of
NSF grant funding being inappropriately shifted from direct research to ad-
ministrative and facility support over a nine-year period. NSF’s revised policy
will require universities and colleges to use the indirect cost rates in effect at
the time awards are made throughout the life of the awards in order to pre-
serve the level of NSF funding awarded for research. It has incorporated the
change into the draft version of its new Award Administration Guide, which is
currently being reviewed by various NSF offices and is expected to be issued
in May 2007. The OIG and NSF are working together to reach agreement
on whether the $1.9 million is properly reported as funds that could be more
efficiently used for accomplishing NSF’s mission.



7
    September 2006, Semiannual Report, pp. 16-17.

                                                                                     23
Audits & Reviews


                   Guidance for Reviewing Indirect Cost Rate
                   Proposals Under Development
                   A recent audit found that NSF could improve its processes for reviewing indi-
                   rect cost proposals from awardees for which it negotiates indirect cost rates.
                   In response, NSF agreed to revise its standard operating guidance for indi-
                   rect cost proposal review. It stated that its new guidance will include policies
                   and procedures for a risk-based program that requires the updated assess-
                   ments of awardees’ financial management systems, maintenance of histori-
                   cal files on awardees’ prior rate negotiations, guidance for staff to facilitate
                   the review of submitted proposals, and more effective tracking of the receipt
                   of proposal and follow up for untimely proposals. NSF has incorporated
                   this change in agency policy into the Proposal & Award Policies & Proce-
                   dures Guide issued on April 12, 2007 effective June 1, 2007. OIG is review-
                   ing the new guidance to ensure that it adequately addresses the findings and
                   recommendations in the audit report.

                   NSF to Validate University’s Corrective Actions

                   As a result of an OIG audit report, NSF has scheduled an onsite visit to How-
                   ard University in late April 2007, to verify that the proposed corrective actions
                   are being implemented by the awardee organization. NSF has also required
                   Howard to provide the results of the two independent verifications that it
                   promised to validate timely and appropriate corrective actions were taken to
                   implement the OIG audit report recommendations.

                   The OIG audit found that Howard had significant internal control weaknesses
                   over cost sharing, funds passed-through to subawardees, faculty salaries,
                   and student stipends. The auditors were not able to determine whether the
                   University actually provided $12.3 million of claimed cost sharing due to in-
                   sufficient documentation and the commingling of funds. Also, Howard lacked
                   comprehensive subaward agreements legally obligating its subrecipients to
                   provide $5.4 million of cost sharing and to restrict $2.3 million of funding to
                   participant support and/or trainee costs.

                   In response to the audit recommendations, the University has implemented
                   corrective actions to improve its federal grants management. It issued a new
                   manual establishing policies and procedures for managing and monitoring
                   federal grants and has undertaken a major reorganization of the University’s
                   research enterprise. Howard appointed a new cabinet-level Vice-President
                   for Research and Compliance and engaged a consultant to assist in estab-
                   lishing an appropriate structure for managing the research enterprise, includ-
                   ing the establishment of effective and efficient internal controls.



                   8
                       September 2006, Semiannual Report, pp. 16-17.

             24
                                                              OIG Semiannual Report   March 2007


Inadequate Internal Controls Result in Repayment of
$131,554 of Grant Funds

An audit of $3 million awarded to New Mexico Highlands University (NMHU)
completed in September 2006 found that NMHU had inadequate internal
controls over cost sharing, subawardee monitoring, expenditure reporting,
and conflicts of interest statements.8 The auditors questioned $165,472 of
NMHU’s claimed costs. In response to the audit, NMHU stated it will imple-
ment an accounting system grant module to track cost sharing and indicated
its grant accounting office is now verifying cost sharing and in-kind contribu-
tions claimed on federal awards. Further, NMHU stated that it has
taken steps to improve its subawardee monitoring. During audit
resolution, NSF reviewed documentation submitted by the Uni-
versity in support of its proposed corrective actions and sustained
$131,554 of the questioned costs.

Work in Progress
Audit of NSF’s Oversight of Center Programs

We recently began an assessment of NSF’s management and
oversight practices related to its eight Center programs. Each
center focuses on a different scientific challenge: from engineer-
ing research to the “science of learning” to nanoscale science and
engineering. Though diverse in subject matter, all are designed to
exploit research opportunities that are sufficiently complex and po-
tentially rewarding to justify bringing together facilities, equipment,
researchers, and students to a single academic setting. In FY
2006, NSF provided over $250 million, representing approximately 5 percent            “Brain Camp” is a
                                                                                      summer program
of NSF’s budget, to 92 individual research Centers. Given NSF’s significant
                                                                                      in which children
investment in using the Centers to advance the frontiers of research and              learn about the brain
education in science and engineering, we will be examining how NSF over-              through fun activities.
sees and manages these Centers to identify best practices and opportunities           It is sponsored by the
                                                                                      Atlanta Center for
for improvement.                                                                      Behavioral Neurosci-
                                                                                      ence (CBN), an NSF
Sufficiency of NSF’s Cooperative Agreements for                                       Science and Technol-
                                                                                      ogy Center.
Large Facility Projects
                                                                                      Credit: CBN
OIG has initiated an audit to determine whether the terms and conditions
included in NSF’s cooperative agreements for the management and opera-
tion of its large facilities projects are sufficient for NSF to provide stewardship
over its programs and assets. We will be reviewing a sample of cooperative
agreements and analyzing their specific terms and conditions in light of each
facility’s unique characteristics and risks.




                                                                                      25
Audits & Reviews


                   A-133 Audit Reports
                   OMB Circular A-133 provides audit requirements for state and local govern-
                   ments, colleges and universities, and non-profit organizations receiving fed-
                   eral awards. Under this Circular, covered entities that expend $500,000 or
                   more a year in federal awards are required to obtain an annual organization-
                   wide audit that includes the entity’s financial statements and compliance with
                   federal award requirements. Non-federal auditors, such as public accounting
                   firms and state auditors, conduct these audits. The OIG reviews these re-
                   ports for findings and questioned costs related to NSF awards, and to ensure
                   that the reports comply with the requirements of OMB Circular A-133.

                   During this reporting period, the A-133 audits of NSF grantees found compli-
                   ance deficiencies and internal control weaknesses resulting in $2.3 million of
                   questioned costs related to NSF awards. The findings contained in A-133 re-
                   ports help to identify potential risks to NSF awards and are useful to both the
                   Foundation and OIG in planning site visits, post-award monitoring, and future
                   audits. Because of the importance of A-133 reports in monitoring awardees,
                   the OIG returns reports that are deemed inadequate to the awardees to work
                   with the audit firms to take corrective action.

                   Findings Related to NSF Awards

                   Category of                               Type of Finding
                   Finding
                                            Compliance    Internal Controls Monetary      Total
                   Financial and Award           49               46                       95
                   Management
                   Salary/Wages                  16               9              7         32
                   Procurement System            17               4              1         22
                   Subawards                     14               5              2         21
                   Equipment                     8                3                        11
                   Indirect Costs                7                1              1          9
                   Property Mangement            5                1                         6
                   System
                   Travel                        7                1                         8
                   Other                         5                2                         7
                   Cost-Sharing                  2                3              1          6
                   General Areas                 3                                          3
                   Other Direct Costs            5                                          5

                   Consultant Services           3                                          3
                   Interest Earned               2                                          2
                   Participant Support                                           1          1
                   Costs
                   TOTAL                        143              75             13        231

             26
                                                            OIG Semiannual Report   March 2007


In this reporting period, we reviewed 138 audit reports, covering NSF expen-
ditures of more than $5.6 billion from fiscal year 2003 through 2006. Among
these reports, the auditors issued three qualified, adverse or disclaimer of
opinions on the financial statements and 24 qualified, adverse or disclaimer
of opinions on the entity’s compliance with federal award requirements. The
reports revealed 143 instances where awardees failed to comply with federal
requirements and 75 instances where weaknesses in awardees’ internal con-
trols could lead to future violations. The auditors also identified 13 instances
of non-compliance with federal requirements that caused them to question
a total of $2.3 million of the costs claimed by recipients of NSF awards. As
detailed in the table on page 26, the most common violations were related to
financial and award management deficiencies and documentation supporting
claimed salary/wages costs.

We also examined 80 management letters accompanying the A-133 audit
reports. Auditors use these letters to report internal control deficiencies
that are not significant enough to include in the audit report, but which could
become more serious over time if not addressed. The letters we examined
disclosed a total of 79 deficiencies that could affect NSF awards in areas
such as segregation of duties to prevent potential fraud and policies and pro-
cedures related to financial and award management.

Findings Related to Timeliness and Quality

For 38 of the 138 audit reports we reviewed in which NSF was the cognizant
or oversight agency, we found that 15 reports (39 percent) were submitted
late or the audit reporting package was incomplete. OMB Circular A-133
requires audits to be completed and reports submitted within the earlier of 30
days after receipt of the auditors’ report(s), or nine months after the end of
the audit period, unless a longer period is agreed to in advance by the cog-
nizant or oversight agency for audit. In each case, we informed the auditee
that the late submission of a complete reporting package could affect the
organization’s risk profile and suggested that all future A-133 audits be per-
formed and submitted in a timely matter.

The A-133 reports we reviewed also revealed problems with audit quality.
Auditors are required to follow OMB Circular A-133 guidelines regarding the
presentation of the audit findings. However, we found that 12 reports (32
percent) did not present the findings in sufficient detail. OMB Circular A-133
also provides guidance to the auditee on the preparation of a Corrective
Action Plan. We found that 13 reports (34 percent) either did not include a
Corrective Action Plan or the plan was incomplete. The OIG identified each
of the potential errors and contacted the auditors and awardees, as appropri-
ate, for explanations. In each case, the auditors and awardees either pro-
vided adequate explanations or additional information to demonstrate com-
pliance with the Circular, or the error did not affect the results of the audit.
While some of the errors were clearly immaterial, the auditors and awardees

                                                                                    27
Audits & Reviews


                   generally acknowledged that the errors reduced the reliability of the reports.
                   In each case, we issued a letter to the awardee to inform them of the results
                   of our review and to identify issues on which they should work with the audi-
                   tors during future audits to improve the quality and reliability of the report.




             28
                                                  Investigations

Civil and Criminal Investigations
Research Firm Returns $1.55 Million and Enters
into a Compliance Plan

A Maryland-based social science research firm entered into
a settlement agreement to resolve allegations that it shifted
labor costs from private contracts to government contracts,
and charged government contracts for unallowable costs
such as the preparation of bids and proposals, administrative
labor, and overhead. This investigation was initiated pursu-
ant to a qui tam lawsuit filed in 2002. A “qui tam” is an action
brought by a private party, the relator, under the False Claims
Act, alleging the submission of false claims to the federal
government by a contractor or grantee. In this instance, the
relator was a former employee of the firm. The four-year
investigation confirmed the allegations and revealed that the
firm submitted a total of $958,756 in false claims to NSF and
the Departments of Commerce, Justice, and Health and Hu-
man Services. Damages attributed to NSF grants and con-
tracts totaled $395,379. The firm entered into a settlement
agreement which required it to pay $1.55 million to the federal
government. As part of the settlement agreement, the firm
also entered into a four-year Compliance Plan with our office,
requiring implementation and yearly evaluation of a compli-
ance program and an annual financial audit.

Institution Settles with Department of Justice

A review of an institution’s handling of participant support
money revealed the institution wrongfully drew down and
spent over $27,000 in award funds after the expiration date
of the award. The award was for a one-year period and the
institution obtained a one-year, no-cost extension. Two days
before the award expiration date, the institution requested              HIGHLIGHTS
and was denied a second no-cost extension.
                                                                    Civil & Criminal
The program officer that denied the request, reiterated the          Investigations	   29
denial in an email to the PI, and also spoke to the PI on the       Administrative
telephone, emphasizing again that the award had expired,
                                                                     Investigations	   33
and that “no new costs incurred after the expiration of the

                                                                   29
Investigations


                 grant would be honored by NSF.” Despite the program officer’s explicit and
                 repeated instructions, the PI directed the institution’s finance director to
                 draw down all the remaining NSF award funds, approximately $32,000. The
                 institution later characterized this post-expiration drawdown as a “reimburse-
                 ment,” which our investigation revealed to be false.

                 After the award expired, the institution filed a false Federal Cash Transac-
                 tion Report indicating that all NSF funds had been spent as of the end of the
                 reporting period. The PI also filed a Final Project Report, representing that
                 work on the project was complete. The PI and the institution’s general coun-
                 sel denied all knowledge of the program officer’s denial of the request for a
                 second no-cost extension.

                 The Department of Justice (DOJ) accepted our case for prosecution under
                 the civil False Claims Act, and ultimately the institution settled this matter
                 with the DOJ for $52,150 and agreed to implement a compliance plan. Fol-
                 lowing the civil settlement, we recommended that NSF debar the PI for a
                 period of three years. NSF is considering this recommendation.

                 University Foundation Returns Award Funds to NSF

                 An Ohio university returned $16,050 in award funds to NSF as a result of
                 an OIG investigation. The investigation revealed that the PI had apparently
                 reallocated both travel funds and participant support funds to pay personal
                 salary, without obtaining proper approvals from the agency. When expen-
                 ditures appeared in the university’s records that were unusual for the type
                 of award, we reviewed university policies and the financial records of other
                 awards managed by the same PI. While no other irregularities were found,
                 we concluded that the university allowed funds to be reallocated without
                 proper approvals from an NSF program official, and the university agreed to
                 repay those funds.

                 Former Research Center Employee Pleads
                 Guilty to Mail Fraud

                 On March 26, 2007, the U. S. Attorney’s Office (USAO) for the District of Col-
                 orado announced that a former employee of an NSF funded-research center
                 pleaded guilty to one count of mail fraud for misuse of her employer’s credit
                 card. The indictment alleged that the employee used the center’s credit card
                 to purchase items such as books and iPods from retail outlets, and then ad-
                 vertised and resold many of the items on eBay, using the center’s FedEx ac-
                 count to ship them. The employee hid the fact that she was purchasing the
                 items by misrepresenting the items that had been purchased by spreading
                 the charges among several research center accounts. This resulted in many
                 of the purchases being charged directly to federally-funded projects sup-
                 ported by NSF and DOE. Following her plea, the former employee awaits
                 sentencing by the court. The research center returned $8,677.37 to its NSF-
                 funded projects and $6,451.59 to its DOE-funded projects.
          30
                                                                        OIG Semiannual Report   March 2007


News Article Leads to Return of $69,199 to NSF

An investigation initiated as a result of information that appeared in a news
article resulted in $69,199 being returned to NSF. The news article revealed
that another federal agency was withholding substantial funds from a univer-
sity center that NSF also funded. After discussing the matter with the other
agency and the civil fraud division of the Department of Justice, we contact-
ed the university and requested financial and other documents pertaining to
NSF awards to the center.

Our investigation revealed that: 1) there were no documents or timesheets to
support 12 employees whose salaries were charged to the awards; 2) an ad-
ditional 13 administrative and non-technical personnel had been charged to
the awards though only one part-time administrative position was approved;
and 3) there were no timesheets to support the posting of a large number of
salaries to the award. The university reviewed its records, returned $69,199
to NSF, and updated its policies and procedures at the center so that such
discrepancies should not recur.

University Agrees to Return Funds for Misuse
of Program Income

As reported in previous Semiannual Reports,9 we conducted a proactive
review of conference awards for compliance with rules associated with
program income, and as a result several grantees have voluntarily returned
funds that were improperly used. In the course of a follow-up to that earlier
review, we noted that a Texas university did not report program income to
NSF, despite the fact that the university appeared to have charged and col-
lected registration fees.

During the investigation, we learned that the University earned $280,865
in program income for the award from registration fees. The PI improperly
used $103,208 of these funds to pay for meals that took place before the
conference began and to financially reward the students involved in helping
to coordinate the conference. As a result of the investigation, the university
reimbursed NSF for the funds the PI misused.

Recipient of Fellowship Returns NSF Funds

A graduate student repaid three weeks of expenses and stipend totaling
$1,387 to an NSF program after he admitted that he left the program early
without authorization. We initiated an investigation after receiving allegations
that a graduate student may have defrauded an NSF foreign exchange fel-
lowship program by leaving the program several weeks prior to the program’s
ending and providing false information about his return date. The fellowship

9
    September 2004 Semiannual Report, pp.31-32; September 2003 Semiannual Report, p.41.

                                                                                                31
Investigations


                 provided more than $6000 for travel, expenses, and summer stipend. The
                 NSF program office asked the student about information it received that he
                 did not attend the end of the program, and the student responded with un-
                 clear information about his return date and the reasons for the early depar-
                 ture.

                 After the NSF program office referred the matter to OIG, we interviewed the
                 graduate student. He admitted that he left the program three weeks early
                 without receiving appropriate approvals, and later provided inaccurate infor-
                 mation about his return date to the NSF program office. The student wrote a
                 check to NSF for $1,387, the portion of expenses and stipend that the stu-
                 dent received for the three weeks he did not participate in the program, and
                 apologized to the NSF program staff for his actions.

                 OIG and NSF Continue to Jointly Monitor
                 Compliance Agreements

                 In this reporting period, OIG and NSF have been responsible for the contin-
                 ued monitoring of two compliance agreements, one with a large city school
                 district and one with a Florida university. As reported in previous Semian-
                 nual Reports,10 compliance agreements are included in settlements reached
                 with grantee institutions whose financial control systems deficiencies have
                 failed to prevent financial improprieties. The two compliance agreements
                 required each entity to create and implement a compliance program. The
                 entities are also required to submit annual compliance reports, to include
                 annual independent audit reports of all NSF award funds at each respective
                 entity, for each year that the compliance agreements are in effect.

                 During this reporting period, the school district conducted its independent
                 audit and submitted its annual compliance report, within the required time-
                 frame. However, the Florida university failed to complete its independent
                 audit and to submit its annual compliance report in a timely manner. As a
                 result, we notified NSF management that the university was in breach of the
                 compliance agreement. Subsequently, the university submitted a corrective
                 action plan as permitted by the compliance agreement, which required the
                 independent audit and annual report to be completed within 120 days. OIG
                 and NSF management worked together with the university to help bring it
                 into compliance, by ensuring that its independent audit and its annual report
                 were both completed within 120 days of the initial breach, as envisioned by
                 the corrective action plan. We are currently reviewing the annual audit and
                 the annual compliance report to determine whether the university has effec-
                 tively corrected the breach.




                 10
                   March 2006 Semiannual Report, p.28; September 2005 Semiannual Report, pp.23-24; March
                 2005 Semiannual Report, pp.27-28.

          32
                                                              OIG Semiannual Report   March 2007




Administrative Investigations
Actions by the Deputy Director
NSF Finds PIs Committed Research Misconduct in Six Sepa-
rate Cases

The September 2006 Semiannual Report presented the results of six sepa-
rate investigations of plagiarism that were forwarded to NSF for appropriate
action. The following summaries describe the outcome of each case:

     • NSF agreed with our recommendations to make a finding against a PI
       who plagiarized text in three proposals. It required the PI to certify in
       writing for a period of three years that any documents submitted to NSF
       are free of any plagiarism.11

     • NSF concurred with our recommendations, finding that a PI at a New
       Jersey institution committed research misconduct by plagiarizing text
       into two NSF proposals. In addition, the PI’s university did not renew
       his contract of employment.12

     • NSF’s Deputy Director made a finding of research misconduct in the
       case of a New York university professor who plagiarized text into three
       proposals submitted to NSF, but who claimed that the NSF electronic
       submission process removed quotation marks and citations from
       his proposals. The DD also proposed a three-year debarment from
       receiving federal funds and required that, for three years following the
       period of debarment, the professor certify and a responsible official of
       his employer provide an assurance, that any NSF proposals or reports
       submitted do not contain plagiarized, falsified, or fabricated material.
       The professor objected to the proposed debarment, but the Deputy
       Director affirmed her decision. The time period for the professor
       to appeal the finding of research misconduct to the NSF Director is
       pending.13

     • NSF concurred with our recommendations concerning a case in which
       a professor resigned from his tenure-track position after the university
       investigation concluded that he had plagiarized text into proposals
       submitted to NSF and other federal agencies. The Deputy Director
       made a finding that the professor committed research misconduct, sent
       him a letter of reprimand, and required him to certify for two years that
       any documents submitted to NSF are free of any plagiarism.14
11
   September 2006 Semiannual Report, p.39.
12
   September 2006 Semiannual Report, p.39.
13
   September 2006 Semiannual Report, p.36.
14
   September 2006 Semiannual Report, pp.39-40.
                                                                                      33
Investigations


                      • A very senior university professor plagiarized text in two NSF proposals
                        despite prior warnings from colleagues that one of the proposals
                        contained plagiarized text. NSF made a finding of research misconduct
                        and concurred with our recommendations. The agency took the
                        following actions: debarred the professor for two years; required the
                        PI to certify, and a responsible official of his employer to assure, that
                        proposals he submits to NSF do not contain plagiarized, falsified,
                        or fabricated material for three years after the debarment period;
                        prohibited the PI from reviewing NSF proposals for a period of two
                        years, concurrent with the debarment period; and required the PI to
                        complete a course in research ethics.15

                      • NSF made a finding of research misconduct for a PI who plagiarized
                        text into an NSF proposal from several source documents. Based on
                        our investigation NSF also concurred with our recommended actions,
                        including requiring him to certify to OIG that proposals he submits to
                        NSF for one year from the date of NSF’s letter of reprimand do not
                        contain plagiarized, falsified, or fabricated material. As a result of the
                        institution’s investigation, the institution’s adjudicator had previously
                        recommended that the PI’s employment with the institution be
                        terminated. However, after negotiations, the PI was placed on half-pay
                        for one year with additional restrictions.16

                 NSF Concludes Postdoctoral Fellow Falsified Research Data

                 In our last Semiannual Report,17 we discussed our investigation of an NSF-
                 funded postdoctoral fellow at a New England institution who falsified data
                 in a published article. Based on our investigation and recommendations,
                 NSF found that the postdoctoral fellow committed research misconduct, sent
                 him a letter of reprimand, and debarred him for two years. NSF also imple-
                 mented our other recommendations which: require him to certify to NSF that
                 the publication containing the falsified data has been retracted; require him to
                 certify completion of an ethics course covering research misconduct before
                 applying for NSF funding; require that, each time he submits a proposal or
                 report to NSF for three years after the debarment period, the PI certify and
                 provide assurances from his employer that the submissions do not contain
                 plagiarized, fabricated, or falsified material; and bar the PI from participating
                 as a reviewer of NSF proposals for three years.

                 PI’s Appeal of Research Misconduct Finding Rejected

                 NSF’s finding of research misconduct against a PI who copied text from
                 numerous sources into several of his NSF proposals, including proposals
                 he submitted during the course of the investigation was upheld on appeal.18
                 15
                    September 2006 Semiannual Report, pp.37-38.
                 16
                    September 2006 Semiannual Report, p.38
                 17
                    September 2006 Semiannual Report, p.37.
                 18
                    September 2006 Semiannual Report, pp.35-36.
          34
                                                             OIG Semiannual Report   March 2007


The PI asked NSF’s Director to reconsider whether the PI’s actions were “a
significant departure from accepted practices of the relevant research com-
munity,” which is the standard for a finding under NSF’s Research Miscon-
duct regulation. The Director affirmed the finding of research misconduct
based on the PI’s own admissions that he copied the text and the university’s
finding that his actions constituted a “violation of the institutional standard of
scholarly integrity.”

Reports Forwarded to the Deputy Director
Co-PI Misleads Colleagues with Copied Text

Our office received a substantive allegation that a proposal submitted to NSF
by a PI and two co-PIs contained a limited amount of text plagiarized from
two sources. We referred the allegation to their university, which investi-
gated and concluded that one of the co-PIs knowingly plagiarized and misled
her colleagues into thinking the copied material was her original text. The
co-PI tendered her resignation, effective June 2007, and in the meantime is
prohibited by the university from submitting proposals for external funding.
We recommended that NSF send a letter of reprimand to the co-PI informing
her that NSF has made a finding of research misconduct. We also recom-
mended that NSF require, a certification from the co-PI for one year begin-
ning June 2007, that all her submissions to NSF contain nothing that violates
NSF’s research misconduct regulation.

Faculty Member Commits Plagiarism in Four NSF Proposals

A member of the faculty of a university was found by the institution to have
committed plagiarism in multiple NSF proposals. We received an allega-
tion that the subject submitted proposals to NSF containing text and figures
plagiarized from several sources, including web sites and published papers.
In response to our inquiry, the subject admitted he had copied the text and
figures without offset or attribution. He also disclosed that two additional
sections of text that had been similarly copied without offset or attribution. In
total, over a span of three years, the subject submitted four proposals to NSF
that contained copied text, figures and references from 18 different original
sources. We referred the investigation into this matter to his university.

Following a careful review of the evidence, the university’s investigation com-
mittee found that a preponderance of the evidence indicated that the subject
committed intentional plagiarism. The subject argued that his practices were
accepted within his field, but the committee concluded that, even if there
were more “permissive standards” in computer science, the subject’s behav-
ior “falls out of the scope.” The committee concluded the subject’s actions
were a significant departure from the standards in his research community,



                                                                                     35
Investigations


                 and that his actions were knowing and willful, and that his plagiarism con-
                 stituted a pattern. The university sent the subject a letter of reprimand and
                 required that he provide certifications to university officials that none of his
                 proposals or written research materials contain plagiarism, that he take a
                 course in research ethics and that he forego eligibility for any salary increase
                 not mandated by the state during the 2006-2007 academic year.

                 We concurred with the university’s conclusions, and found its discussion on
                 the seriousness of the subject’s actions particularly persuasive. According
                 to the committee, the subject’s actions were unequivocally wrong because of
                 the extent of plagiarism, his position as a faculty member, and his responsi-
                 bility to uphold his community standards. We recommended that NSF: send
                 the subject a letter of reprimand concluding that his plagiarism is research
                 misconduct; require for two years after the issuance of the reprimand that
                 the subject certify and obtain assurances from institution officials that any
                 proposals, reports, and other documents submitted to NSF do not contain
                 plagiarized, falsified, or fabricated material; and require him to complete a
                 course in research ethics.

                 Co-PI Copied Text into NSF Proposal

                 A proposal submitted to NSF by a PI and two co-PIs at a Wisconsin univer-
                 sity contained a limited amount of text copied from six sources. Previously
                 OIG had received an allegation about the proposal and contacted the sub-
                 jects. They then reported the allegation to their university, which initiated an
                 investigation. The university concluded that one of the co-PIs recklessly pla-
                 giarized, and that the PI and other co-PI were negligent in their review of the
                 proposal. The university applied the same sanction against all three subjects
                 by requiring that a certified committee of researchers review all submissions
                 for external funding from each of them for a period of one year.

                 We concurred with the university that the co-PI plagiarized, but concluded he
                 did so knowingly, not recklessly. We concluded the PI and other co-PI acted
                 negligently and that neither acted with a culpable level of intent necessary for
                 a finding of research misconduct. We recommended that NSF: make a find-
                 ing of research misconduct against the co-PI; require the PI to submit copies
                 of the university’s assurances for one year; require the PI to submit personal
                 certifications for one year; and require certification the PI complete an ethics
                 class.

                 Pattern of Plagiarism Committed by a University Professor

                 A New York university professor plagiarized a substantial amount of text from
                 multiple sources into a proposal submitted to NSF, and into two research
                 publications acknowledging NSF support. The professor claimed that his
                 students and post-doctoral research associate provided the plagiarized texts
                 to him in their research progress reports. A university investigation con-

          36
                                                            OIG Semiannual Report   March 2007


cluded that these individuals did not provide the text, and determined that the
professor had also plagiarized text into a previously submitted NSF proposal,
and into three internal university proposals.
	
We recommended that NSF make a finding of research misconduct; debar
the subject from receiving federal funds for a period of two years; prohibit the
subject from serving as a reviewer of NSF proposals for the same two-year
period; and require, for a period of two years after the debarment period,
that the subject submit assurances by a responsible official of his employer
that any proposals or reports submitted by the subject to NSF do not contain
plagiarized material. We also recommended that NSF require the professor
to complete an ethics training course.

Significant Administrative Cases
Program Income Identified at NSF-Supported Center

During an OIG investigation into allegations of fraud, we discovered that an
NSF-sponsored center had not reported program income to the agency as
required. The center was generating revenue from the sale of two research-
oriented items. We determined that all of the revenue from the sale of the
first item and part of the revenue from the second item constituted program
income that should have been reported to the agency. The institution agreed
that program income in the amount of $26,000 generated by the first item
should be used to offset costs associated with the grant but disagreed with
our assessment of the second item. We informed the program officer and
the grants officer of our differing opinions and asked them to determine
whether the income generated by the second item is in fact program income
and should be used to offset NSF grant funds. A decision is pending.

University Refunds Overpaid Indirect Costs

During the course of our investigation of a co-PI’s time and effort under an
NSF-funded award, a Texas university self-identified and refunded to NSF
an overpayment of indirect costs to a subawardee under that same award.
While the issue of the co-PI’s time and effort was ultimately determined to
be an internal personnel issue for the university, in the course of the investi-
gation another issue arose concerning indirect costs. Under OMB Circular
A-21 G.2., the “modified total direct costs” (MTDC) is used to determine
the amount of the awardee’s indirect costs that may be claimed under the
award. Awardees may include in their MTDC up $25,000 of expenses paid
to a subawardee. The university self-identified that it had included more than
$25,000 in its MTDC in determining its indirect costs under the award, and
refunded the overpayment of $6,424.20 to NSF.




                                                                                    37
Investigations



  PIs Are Responsible for Contents of Their Proposals

  In a number of recent cases of apparent plagiarism, PIs have sometimes claimed
  that graduate students or post-doctoral research associates who are not named or
  otherwise credited in the proposal are responsible for the plagiarized text. The NSF
  Grant Proposal Guide (GPG) states: “Authors other than the PI (or any co-PI) should
  be named and acknowledged.”19 Grant writers, students, and post-doctoral research
  associates who prepare sections of the proposal should therefore be named in the
  proposal.

  When investigating an allegation of plagiarism, in the absence of other identified au-
  thors, we contact the PI and all co-PIs. If the explanation provided indicates that an
  unnamed individual (such as a graduate student or post-doc) was responsible for the
  copied text, we contact that individual to confirm the explanation. Unfortunately, many
  times these individuals have left the university, and in some cases, the country, mak-
  ing it nearly impossible to validate the explanation.

  We believe that final responsibility for the contents of the proposal ultimately resides
  with the named authors of the proposal—the PI and the co-PIs. Recent university
  investigation committees share this view. Therefore, PIs should carefully review any
  written materials that their students and post-docs provide as a part of a submitted
  proposal to ensure they meet the high scholarship standards required of an NSF pro-
  posal.20




                 19
                   Chapter 1, Section D3, page 13.
                 20
                   Grant Proposal Guide, NSF 04-23, available at http://www.nsf.gov/publications/pub_summ.
                 jsp?ods_key=gpg

          38
                                            OIG Performance
                                            Report 2006-2007
Goal 1
Promote NSF Efficiency and Effectiveness
1. Identify and implement approaches to im-
prove product quality and timeliness.

 • Analyze the costs and benefits of moving to electronic
   workpapers; if feasible, conduct pilot testing with the
   internal audit team.
 • Develop a statement of work for performance audits
   conducted by contract auditors at grantee institutions.
 • Complete most OIG audits within one year of conducting
   the planning conference.
 • Complete 75% of all audits carried over from prior year.
 • Assess results of the annual employee survey and
   develop appropriate steps to address the highest priority
   concerns of the audit staff.
 • Finalize and issue an audit follow-up and resolution
   policy.
 • Develop and issue a policy for performing annual and
   final contract close-out audits.
 • Link the AIGA and AIGI performance plans to their
   respective staff performance plans.
 • Identify workload targets for each audit team.
 • Review ECIE methods for ensuring the quality and
   timeliness of investigative products.
 • Ensure the investigative sufficiency of all cases.
 • Update Investigations Manual and forms.

OIG continued to make progress in improving audit timeli-
ness and quality. During this semiannual period, we began
a project to assess the benefits of implementing electronic
workpapers within the Office of Audit and analyze the cost
and functionality of several alternatives. Conversion from

                                                               39
Performance Report


                     paper to electronic workpapers should increase audit timeliness and quality
                     by facilitating teamwork, reinforcing professional auditing standards and pro-
                     cedures, and attracting staff with strong technical skills. A volunteer team of
                     auditors and IT professionals is currently evaluating and comparing several
                     “off-the-shelf” software packages, as well as other alternatives. We expect
                     to make our recommendation within the next month.

                     For audits contracted to certified public accounting (CPA) firms we also
                     developed a new statement of work, which emphasizes the evaluation of
                     awardees’ internal controls. This new model should benefit awardee institu-
                     tions and NSF management by providing proactive assessments of award-
                     ees’ capabilities for managing federal funds to prevent problems caused by
                     internal control deficiencies. We plan to use this model for future audits of
                     NSF awardees performed by contractors.

                     In the past year OIG completed 55 percent of the audits contracted to CPA
                     firms and 56 percent of audits performed by OIG staff within one year and
                     68 percent of the audits carried over from the prior year. Although the com-
                     pletion rate for carryover audits was less than the target rate of 75 percent,
                     we implemented two initiatives to help the office reach the goal for next year:
                     1) we reduced the levels of review for low and medium-risk audits, which
                     have minimal or non-material findings, respectively, thus reducing the time to
                     completion; and 2) we developed a tracking process for quarterly workload
                     targets for each audit team in order to more closely link individual and team
                     production to office performance goals.

                     To address issues raised in the 2006 OIG employee survey, we established
                     an Employee Survey Advisory Group to advise senior audit management.
                     This group recommended ways to improve communications, utilize contrac-
                     tors more effectively, and issue audit reports more efficiently. The Advisory
                     Group will continue to meet at least annually to monitor progress on the
                     implementation of these recommendations.

                     OIG developed policies to guide staff on their roles and responsibilities for
                     audit resolution and contract closeout audits. The audit resolution policy
                     describes the office’s role in resolving and closing audit findings and helps
                     ensure that both audit resolution and the implementation of audit recommen-
                     dations are effective and performed in a timely manner. The contract close-
                     out policy clarifies the office’s responsibilities and priorities in responding to a
                     request for assistance from NSF in closing out its contracts.




               40
                                                           OIG Semiannual Report   March 2007


OIG also made significant strides in improving investigative product quality.
This year we:

 • Adopted staff suggestions to make significant changes in internal Office
   of Investigations processes.

 • Completed an internal peer review with a team composed of members
   from each investigative unit.

 • Updated our Investigations Manual and forms in response to changes in
   law, regulation, or practice within the community.

 • Continued active supervisory review of milestones to ensure timely case
   and project completion.

 • Implemented an electronic flagging system to alert staff of approaching
   case-specific milestones.

 • Provided advice and assistance to other OIGs in individual peer
   reviews, as well as suggestions for improving investigative processes, in
   our role as a coordinator of the ECIE investigative review process.

 • Ensured effective quality control and quality assurance on all
   Investigative Reports and Management Implication Reports.

 • Continued to employ a forensic auditing firm to support investigations,
   enabling us to realize significant improvements in our information
   analysis, increase recoveries, raise the frequency of agreement by
   NSF management on recommended actions, and resolve more cases
   without an increase in the number of investigators.

 • Achieved the direct alignment of all individual staff performance plans
   with the OIG Performance Plan.



2. Strengthen our focus by refining approaches for
selecting work and setting priorities.

 • Conduct audit plan brainstorming meeting, document results, and
   develop appropriate steps to address ideas of audit staff as summarized
   by the audit planning team.
 • Develop and execute the annual audit plan.
 • Develop a catalog of publications for an audit planning library.


                                                                                   41
Performance Report


                      • Initiate a listing of NSF programs by dollar amount/cost by program.
                      • Perform and document annual risk assessment of NSF’s award
                        portfolio.
                      • Document methodology for final selection of audits to be included in the
                        annual audit plan.
                      • Develop a list of investigation risk areas through consultation between
                        the offices of Audit and Investigations.
                      • Identify audit and investigation issues arising from NSF priorities, high-
                        risk programs, and management challenges.


                     The Audit office held brainstorming sessions in June 2006 to begin prepara-
                     tion of the FY 2007 Audit Plan. We incorporated ideas from those sessions
                     with risk assessments of NSF awards and awardee institutions, OIG’s annual
                     Management Challenges Letter, referrals from Investigations, and NSF’s au-
                     dit requests into the FY 2007 Audit Plan, which we presented to the National
                     Science Board in September 2006. For reference in future audit planning,
                     we also documented the methodologies used in developing the risk assess-
                     ments and prioritizing audits in the Plan. In addition, this year we developed
                     a hyperlinked audit library of resources and obtained a list of NSF programs
                     by dollar amount. All of these actions strengthen the OIG’s capabilities for
                     selecting work and setting priorities.

                     Staff from the offices of Investigations and Audit met regularly to exchange
                     information, identify common concerns, proactively address possible con-
                     flicts and redundancies, and monitor referrals that had been made. These
                     meetings have helped to improve each unit’s understanding of the other’s
                     work, enhance office-wide sharing and cooperation, and discover ways to
                     use this knowledge in assessing risks and establishing priorities pertaining to
                     their work.

                     An Investigations team reviewed NSF’s last two strategic plans, its budget
                     request, high-risk list, and the Management Challenges letter to identify mat-
                     ters, programs, or awardees warranting investigative scrutiny. This informa-
                     tion proved valuable in the development of the Investigative Proactive Review
                     Plan.




               42
                                                            OIG Semiannual Report   March 2007


Goal 2
Safeguard the Integrity of NSF
Programs and Resources

1. Detect and address improper, inappropriate,
or illegal activities.

 • Ensure that NSF and grantees adequately respond to OIG investigative
   findings
 • Explore the feasibility of implementing a plagiarism software program.
 • Improve our ability to detect falsified figures in NSF proposals.
 • Accelerate the research misconduct investigation process.
 • Develop a mechanism for assessing questionable research practices,
   questionable financial measures, and questionable management/
   administrative practices.


OIG continues to improve its ability to detect and address improper, inap-
propriate, and illegal activities. We tracked the responsiveness of both NSF
and its awardees to OIG recommendations and found that in almost every
instance, agency management accepted our factual findings and recommen-
dations. Similarly, we saw affirmative responses to our recommendations
throughout the NSF awardee community. Numerous compliance agree-
ments and ethics programs have been initiated or refined as a result of our
work.

This year we assessed and updated our investigative tools to take advantage
of recent advancements in technology and ensure that the process of con-
ducting research misconduct and civil/criminal investigations is as efficient as
possible. We examined various plagiarism software programs and selected
one for procurement. We are also assessing programs for detecting falsified
figures in proposals. Additionally, our criminal investigators evaluated some
newly developed search tools for collecting information about subjects and/
or witnesses and compared them to our current system. After considering
the results, cost, and ease of operation of each product, we selected a new
system.

Our research misconduct investigations rely heavily on the efforts of inquiry
and investigation committees at the research universities. In each case, we
examine the relevant university report to determine if it meets the require-
ments laid out in NSF’s policies. In cases where the committees’ efforts fall
short, OIG staff may perform the additional work required to submit the find-
ings to the NSF Deputy Director for adjudication. To reduce the instances of

                                                                                    43
Performance Report


                     insufficient university reports, we drafted a plan this year for improving the
                     performance of their committees and for identifying those institutions that fail
                     to correct their conduct in this important area.

                     In addition, we have developed procedures for assessing and addressing
                     questionable research, financial, and management or administrative prac-
                     tices. When staff professionals encounter these situations, we immediately
                     assess whether the matter warrants a full investigation or is more appropriate
                     for letters of warning.

                     2. Strengthen OIG proactive activities.

                      • Increase the use of financial information data mining and analysis
                        techniques to detect fraud indicators.
                      • Develop a Proactive Review Action Plan to identify systemic
                        weaknesses.
                      • Assess investigative priorities and case trends.
                      • Expand the use of plagiarism software for proactive identification of
                        plagiarism in NSF proposals.


                     OIG continues to emphasize the prevention and detection of fraud, waste,
                     and abuse in the course of its proactive review program. During this period,
                     the use of financial information data mining and analysis techniques to detect
                     instances of fraud has become a part of our routine investigative process.
                     We also expanded the process of crafting our Proactive Review Action Plan.
                     Investigators conducted brainstorming sessions with auditors, solicited sug-
                     gestions regarding vulnerable programs and high-risk institutions from NSF,
                     and polled organizations composed of members of the research community.
                     In addition, we surveyed the IG community to determine if they had practices
                     that might be adopted to improve our proactive reviews of NSF programs
                     and operations. The data obtained will be used to implement the office’s pro-
                     active review plan for this next performance year. We are assessing investi-
                     gative priorities and case trends as part of our development of the proactive
                     review plan.

                     Our proactive review of selected 2005 proposals, using plagiarism software,
                     has been delayed until new software is procured early in the next perfor-
                     mance year.




               44
                                                             OIG Semiannual Report   March 2007


Goal 3
Utilize OIG Resources Effectively
and Efficiently

1. Strengthen and utilize the professional expertise and
talents of all OIG staff.

 • Conduct annual survey of OIG staff to obtain its views on the
   effectiveness of
     ○ OIG  use of its resources in personnel, equipment, technology and
       contracting,
     ○ Management      planning, policies, and procedures,
     ○ Internal   communications and coordination.
     ○ OIG   impact on NSF, and
     ○ KMS   and other management tools.


 • Analyze survey results and develop and implement corrective actions
   for any problems identified.
 • Make system enhancements to KMS, including development of an
   administrative support module.
 • Conduct KMS and other IT training, as necessary.
 • Update KMS user manuals.
 • Provide prompt, effective responses to requests for IT support.
 • Establish a new-employee orientation program.
 • Update and finalize auditor and management analyst position
   descriptions.
 • Develop audit and investigation core competencies.
 • Develop audit and investigation core training programs.
 • Complete training identified in Individual Development Plans.
 • Ensure all investigative staff complete appropriate skill level classes.
 • Develop an Audit Training Plan.
 • Develop workload targets in audit staff performance plans.




                                                                                     45
Performance Report


                     The employee survey committee issued its report in April 2006, identifying
                     the primary concerns of OIG staff based on their survey responses. The
                     committee recommended improving trust between supervisors and staff,
                     better accounting by senior managers for all issues that received less than
                     adequate ratings in the survey, and clarification of OIG’s telecommuting
                     policy. In response, we made an effort to improve communications between
                     supervisors and staff to help define more clearly and alleviate the issues in-
                     volving trust. The offices of Audits and Investigations formed advisory com-
                     mittees to help them implement specific actions. Audits established a group
                     to recommend ways to improve internal communications, utilize contractors
                     more effectively, and process audit reports more efficiently. Investigations
                     established a working group to address various concerns raised in the sur-
                     vey and ensure continued positive change. After a review of the telecom-
                     muting policy, the OIG leadership decided that the policy was sufficiently
                     clear but that it was not being implemented properly. Supervisors have been
                     encouraged to allow wider use of telecommuting by their staffs and the next
                     survey will test whether employees feel they are given adequate opportunity
                     to telecommute. The 2006 survey showed that problems identified in previ-
                     ous years’ surveys, including insufficient cooperation and information sharing
                     among OIG units, have been largely resolved.

                     Because the most pressing issues identified in the annual employee surveys
                     over the past five years appear to have been addressed, senior management
                     determined that it would be more useful to administer the employee survey
                     every two years so that actions taken in response to the previous surveys
                     would have time to take effect and be more meaningfully assessed.

                     We continued to make enhancements to the OIG Knowledge Management
                     System (KMS), including the development of modules for administrative
                     support and new employee processing. These modules facilitate 1) manage-
                     ment and tracking of personnel actions and inventory, 2) intra-office commu-
                     nications, and 3) human capital planning. In addition, new performance re-
                     ports allow management and staff to more readily associate individual/group
                     achievements with office-wide goals and plans. We also hired an informa-
                     tion technology specialist to provide more prompt and effective responses to
                     requests for IT support. All training planned for the KMS system was suc-
                     cessfully completed and user manuals were updated.

                     This year OIG launched a new initiative to improve the processing and ori-
                     entation of new employees. Administrative staff interviewed recently-hired
                     employees about their experiences during the first few months of work to
                     identify areas for improvement. To ensure that new hires speedily receive
                     all of the equipment, supplies, information, and resources they need to be
                     effective, checklists of these essential items are now posted on the shared
                     computer drive so that management can track what they have received.
                     Supported by KMS, the new on-line orientation also includes answers to
                     “frequently asked questions” to help new employees more quickly and easily
                     acquire the knowledge and skills they need to perform their jobs.

               46
                                                              OIG Semiannual Report   March 2007


The Audit office updated all auditor and management analyst position de-
scriptions this year. The new position descriptions incorporate seven core
competencies: thinking analytically, applying subject matter knowledge,
communicating effectively, evaluating tasks and achieving results, solving
problems, working in teams, and making decisions. The position descrip-
tions also include additional competencies, such as managing resources,
building consensus, and serving customers, which staff members are ex-
pected to develop within one year after entering their positions. Investiga-
tions likewise refined the core competencies of its staff.

The Audit office developed core training programs for GS 7-12 positions.
The Government Auditing Standards require 80 hours of continuing profes-
sional education for auditors every two years. This year OIG has contin-
ued to track training hours for each audit staff member and has approved a
training plan that will ensure that all audit staff comply with these standards.
The development of the new position descriptions and competencies and
the monitoring of staff training will strengthen audit staff and ensure that their
skills are applied more effectively and efficiently to OIG work.

Investigations also developed a specific core training regimen to ensure that
its staff is professionally trained. However, all the training listed in the Indi-
vidual Development Plans of some staff members could not completed due
to course cancellations, case-related demands, and unanticipated problems
with the Inspector General Academy courses. Management, administrative
and legal staff also participated in extensive training to maintain their leader-
ship and professional skills through such programs as the Federal Executive
Institute, Inspector General Retreats, the Department of Commerce Science
and Technology Fellowship Program, the Federally Employed Women’s
Conference, Senior Executive Service Forums, the Aspen Institute, the NSF
Academy, and international workshops. Across all units, OIG remains com-
mitted to maintaining a highly motivated and well-trained staff.

In addition, for this performance year the Audit office added “workload tar-
gets” as a new critical element in individual performance plans to enable
auditors to meet the workload targets of the OIG Annual Performance Plan,
including ensuring individual audits are completed within one year of the start
date.

2. Improve communication and collaboration within OIG.

 • Facilitate information exchange and referrals among the Audit,
   Investigation, and Administrative units.
 • Share information about audit, investigative, and administrative activities
   at all-staff meetings.
 • Strengthen Investigations/Audit/Administrative teams performing OIG/
   NSF liaison duties.

                                                                                      47
Performance Report


                      • Conduct periodic meetings between audit and investigation managers to
                        discuss cross-cutting issues, mutual concerns, and cooperative efforts.
                      • Use office-wide committees for completion of various OIG projects and
                        activities.
                      • Conduct periodic informational meetings for administrative staff from
                        each OIG unit.
                      • Ensure staff participation in the development and implementation of the
                        annual OIG Performance Plan.


                     Information exchange among the different units that comprise the OIG
                     continues to be open and effective. All units have contributed to improved
                     communication and collaboration within OIG through participation in formal
                     and informal meetings, activities, and training events. Audit and Investiga-
                     tions staff meet regularly to discuss issues of mutual concern and to monitor
                     matters that have been referred between the offices. Many referrals are ex-
                     plored during these meetings, and while some are found to lack substance,
                     action is taken on any deemed to be significant. In addition, a number of
                     brainstorming sessions between Audit and Investigations staff have been
                     convened to generate ideas for proactive reviews, investigative priorities, and
                     audit planning. The Administrative Manager also convened periodic meet-
                     ings of administrative staff members to share information and ideas, develop
                     solutions to common problems, and keep everyone current on changes in
                     procedures and requirements.

                     During the performance period, an auditor, investigator, other OIG staff mem-
                     ber, or a team of employees, made presentations at virtually all of the office’s
                     monthly staff meetings to share information about their work. Surveys indi-
                     cate that the presentations were well received and considered professionally
                     valuable. There was strong participation in the OIG liaison program, in which
                     staff members from different OIG units are paired to establish an ongoing
                     relationship with their designated NSF directorate, division, or office. Staff
                     members were also active on office-wide committees set up to handle every-
                     thing from planning the annual office retreat to preparing an analysis of the
                     employee survey. In addition, staff throughout the office contributed to the
                     development of the annual OIG Performance Plan.

                     3. Ensure effective external communications and consulta-
                     tion with our stakeholders.

                      • Produce timely external reports on OIG results and issues.
                      • Provide testimony and other requested information to congressional
                        committees.
                      • Provide briefings to the NSB, Congress, OMB, NSF, and others
                        regarding OIG plans, priorities, and progress.

               48
                                                          OIG Semiannual Report   March 2007


 • Prepare timely OIG budget requests.
 • Issue two OIG Newsletters by email.
 • Update NSF leadership regularly on OIG activities and concern.
 • Participate in NSF committees and task forces, as appropriate.
 • Collaborate with federal and international agencies to advance common
   audit, investigative, and management goals.
 • Provide leadership and active participation in the IG community.
 • Track and coordinate GAO audits of NSF programs.
 • Develop guidance for the OIG/NSF liaison program.
 • Conduct active outreach to NSF and the research community.
 • Ensure that most liaison teams include representatives from more than
   one OIG unit.
 • Improve presentation and content of OIG website.
 • Track usage of OIG website.
 • Ensure that FOIA/PA requests are processed in a timely manner.


During the past year, OIG prepared all reports for which it was responsible,
including two Semiannual Reports to Congress, NSF’s Financial Statement
Audit Report, an OIG Performance Report, and a Management Challenges
Letter, all of which were issued within the timelines prescribed either by law
or by specified due dates. We also issued our 2008 budget submission
according to OMB and Congressional requirements. Further, OIG provided
suggestions for new legislation at the request of a Congressional committee.
In addition, OIG leadership met with Congressional and OMB staff to discuss
OIG operations and priorities.

Our staff and its financial statement audit contractor gave briefings at most
meetings of the Audit and Oversight Committee of the National Science
Board, including the status of NSF’s financial statement audit and the effec-
tiveness of the corrective actions taken by the agency in response to previ-
ous financial audits, OIG’s proposed budget submission, the annual audit
plan, and significant investigations and audit reports. We released two elec-
tronic newsletters to inform NSF stakeholders of OIG’s significant audits and
investigations between the issuances of our Semiannual Reports to Con-
gress. In addition, the IG and Deputy IG conducted briefings for the NSF
Director and Deputy Director at regular intervals to apprise them of OIG’s
activities and discuss opportunities to improve agency operations.

OIG staff actively participated in NSF committees. For example, Audit staff
members were active in the Audit Coordinating Committee, which resolves
coordination issues associated with the financial statement audit. The Se-

                                                                                  49
   Performance Report


                         nior Policy and Operations Advisor serves as an executive secretary to the
                         Audit and Oversight Committee of the National Science Board. The Deputy
                         IG participated in quarterly Division Director retreats and served as the OIG
                         liaison for the agency’s Office of Equal Opportunity. During the past year we
                         continued to advance our goal of enhancing communications with agency
                         staff by presenting at NSF-organized events. We spoke at the conflict-of-
                         interest briefings conducted by the NSF ethics official approximately twice a
                         month and gave presentations at each of the NSF Program Manager’s Semi-
                         nars, which provide new NSF program managers with detailed information
                         about the Foundation and its activities. OIG also reached out to the larger
                         research community by attending approximately 50 separate events, mostly
                         held by universities across the country, to make presentations or participate
                         in a conference or forum.
Deputy AIG William
Harrison congratulates   As institutions around the world increasingly collaborate to conduct scientific
Sherrye McGregor on      research, it is important that those who fund and perform research have an
her award from the       understanding of the rules, regulations, best practices, and research ethics
Virginia Society of
                         that exist in other countries. The NSF OIG has been at the forefront of this
Research Adminstra-
tors for her keynote     effort. The IG was designated as the United States representative to the
address to their fall    Global Science Forum Expert Group, which was formed to address the need
meeting.                 for better understanding of the differences among countries in approaching
                                                 research misconduct issues and to develop practi-
                                                 cal guidance for governments on handling research
                                                 misconduct and conducting training on ethical issues.
                                                 The IG also spoke at the International Network of Re-
                                                 search Management Societies in Australia, where she
                                                 called for the development of national and internation-
                                                 al standards for investigating allegations of research
                                                 misconduct. These exchanges have helped heighten
                                                 international awareness of the need for common defi-
                                                 nitions and rules in the area of research misconduct.
                                                 NSF OIG continued to co-host the Accountability in
                                                 Science Research Funding workshop, which this year
                         convened in The Hague with representatives of 11 countries in attendance.
                         Twenty-two representatives of the Chinese Ministry of Supervision visited
                         our offices in September to meet with Dr. Boesz and OIG staff. We also
                         participated in a planning meeting for the 2007 International Conference on
                         Research Integrity in Portugal. Attended by 20 representatives from a num-
                         ber of countries and organizations, this conference is designed to facilitate
                         discussion of coordination on research misconduct and ways to improve the
                         education of researchers in ethical behavior.

                         Our office continues to organize and actively participate in committees, proj-
                         ects, and events supported by the IG community. The President’s Council
                         of Integrity and Efficiency and the Executive Council of Integrity and Ef-
                         ficiency (PCIE/ECIE) each year issue a report to the President on the most
                         significant activities and accomplishments of the federal IG community. This


                    50
                                                           OIG Semiannual Report   March 2007


year’s report was prepared jointly by the Department of Agriculture and the
National Science Foundation OIGs. Our investigators participated in the
Procurement Fraud Working Group established by the U.S. Attorney for the
Eastern District of Virginia as well as the newly established National Procure-
ment Fraud Task Force at the Department of Justice. Under the auspices of
the task force, we have taken a leadership role in two areas of grant fraud:
a review of government-wide certification processes; and various OIG out-
reach efforts to program officers and grant recipients. We organized and
hosted a successful Grant Fraud Workshop, which was attended by dozens
of OIG professionals from most grant-making agencies. OIG staff also as-
sisted the IG Academy and the Federal Law Enforcement Training Center
by participating in curriculum review/course development committees and
serving as advisors for the Basic Non-Criminal Investigator Course. We con-
tinued to coordinate the ECIE investigative peer review process and served
as the chair for the PCIE/ECIE Peer Review Revision team. The Deputy IG
served on the PCIE/ECIE award evaluation committee, and the IG was ac-
tive in the PCIE/ECIE Executive Committee, the Investigations Committee,
and the Inspection and Evaluation Committee.

OIG auditors provided leadership to interagency groups established to ad-
vance common audit goals. For example, we chaired the Financial State-
ment Committee of the Federal Audit Executive Council, helped the PCIE
and the Government Accountability Office revise the Financial Audit Manual,
and actively participated in the government-wide Financial Statement Audit
Roundtable. OIG auditors have met monthly during this reporting period
with auditors from other federal OIGs in the Financial Statement Audit Net-
work to discuss proposed accounting standards and requirements for federal
financial statement audits. We also commented on proposed changes to the
Government Auditing Standards, 2007 Revisions (the “Yellow Book”), and
the Federal Accounting Standards Advisory Board’s proposed statement of
concepts on Definition and Recognition of Elements of Accrual-Basis Finan-
cial Statements. Additionally, we contributed to standardizing the govern-
ment-wide statement of work used to procure the financial statement audit
contractors, helped update the Audit Monitoring Guide that assists OIGs in
monitoring the quality of the financial audit performed by the external audi-
tors, and tracked GAO’s audit work at NSF.

OIG’s liaison program continued to achieve its goals of establishing effective
working relationships and communications with the individual directorates
and offices within NSF. OIG liaison teams, usually composed of one auditor
and one investigator, initiated approximately 30 liaison events this year. We
published an internal guide for our liaison program to ensure it continues to
operate in accord with the IG’s original vision. We also made a number of
improvements to the OIG website to facilitate communication with our stake-
holders, including the uploading of our most recent presentations and publi-
cations. Over 23,000 visitors logged onto our website during this reporting
period, an indication of the success of our outreach efforts. One-hundred
percent of the FOIA requests we received were processed within the speci-
fied timeframes.
                                                                                   51
                                  Statistical Data

Audit Reports Issued with Recommendations for Better Use of Funds




                                                Dollar Value
     A. For which no management decision        $1,900,000
         has been made by the commence-
         ment of the reporting period
     B. Recommendations that were issued            $0
         during the reporting period
     C. Adjustments related to prior recom-         $0
         mendations
     Subtotal of A+B+C                          $1,900,000
     D. For which a management decision             $0
         was made during the reporting period
         i) Dollar value of management deci-        $0
              sions that were consistent with
              OIG recommendations
         ii) Dollar value of recommendations        $0
              that were not agreed to by man-
              agement
     E. For which no management decision        $1,900,000
         had been made by the end of the re-
         porting period
     For which no management decision was       $1,900,000
     made within 6 months of issuance




                                                   53
Statistical Data




                           Audit Reports Issued with Questioned Costs
         	
                                                 Number of   Questioned    Unsupported
                                                  Reports       Costs         Costs
             A. For which no management             18       $60,605,063   $2,254,038
                decision has been made by
                the commencement of the
                reporting period
             B. That were issued during the         16       $5,878,712    $2,650,710
                reporting period
             C. Adjustment related to prior         0            $0            $0
                recommendations
             Subtotal of A+B+C                      34       $66,483,775   $4,904,748
             D. For which a management              11       $4,568,637    $1,824,055
                decision was made during
                the reporting period
                i) dollar value of disallowed      N/A        $555,964        N/A
                costs

                 ii) dollar value of costs not     N/A       $4,012,673       N/A
                 disallowed
             E. For which no management             23       $61,915,138   $3,080,693
                 decision had been made
                 by the end of the reporting
                 period
             For which no management                7        $56,036,426    $429,983
             decision was made within 6
             months of issuance




              54
                                                                       OIG Semiannual Report   March 2007




                         Audit Reports Involving Cost-Sharing Shortfalls
		
                                          Number of Cost-Sharing              At Risk of     Actual Cost
                                           Reports   Promised                Cost Shar- Sharing Short-
                                                                            ing Shortfall falls (Completed
                                                                              (Ongoing         Project)
                                                                               Project)
 A.    Reports with monetary                   3          $11,602,658         $606,563          $8,101
       findings for which no
       management decision
       has been made by the
       beginning of the reporting
       period:
 B. Reports with monetary                      2           $2,147,780        $505,538           $0
       findings that were issued
       during the reporting pe-
       riod:
 C. Adjustments related to                     1                $0            $13,562           $0
       prior recommendations
 Total of reports with cost shar-              5          $13,750,438       $1,125,663         $8,101
 ing findings (A+B+C)
 D. For which a management                     2          $6,922,394         $335,187          $8,101
       decision was made during
       the reporting period:
       1.Dollar value of cost-shar-            2          $6,922,394              $0           $8,101
       ing shortfall that grantee
       agreed to provide
       2.Dollar value of cost-                 2          $6,922,394         $335,187           $0
       sharing shortfall that man-
       agement waived21
 E. Reports with monetary                      3          $6,828,044         $790,476           $0
       findings for which no
       management decision has
       been made by the end of
       the reporting period




21
  Indicates the dollar value waived by management primarily due to additional documentation
provided during audit resolution to support the questioned amounts.

                                                                                               55
Statistical Data




       Status of Recommendations that Involve Internal NSF Management Operations

     Open Recommendations (as of 3/31/2007)
     Recommendations Open at the Beginning of the Reporting Period22                                 76
     New Recommendations Made During Reporting Period                                                24
     Total Recommendations to be Addressed                                                          100
     Management Resolution of Recommendations23
     Awaiting Resolution                                                                            28
     Resolved Consistent With OIG Recommendations                                                   72
     Management Decision That No Action is Required                                                  0
     Final Action on OIG Recommendations24
     Final Action Completed                                                                         34
     Recommendations Open at End of Period                                                          66

     Aging of Open Recommendations
       Awaiting Management Resolution:
     0 through 6 months                                                                             19
     7 through 12 months                                                                             1
     More than 12 months                                                                             8
     Awaiting Final Action After Resolution
     0 through 6 months                                                                              5
     7 through 12 months                                                                            14
     More than 12 months                                                                            19




22
   Two recommendations were not previously reported.
23
   “Management Resolution” occurs when the OIG and NSF management agrees on the corrective
action plan that will be implemented in response to the audit recommendations.
24
   “Final Action” occurs when management has completed all actions it agreed to in the corrective
action plan.


            56
                                                               OIG Semiannual Report    March 2007



                     List of Reports NSF and CPA Performed Reviews

Report     Subject                         Questioned-    Unsup-      Better Use       Cost Sharing
                                                                                         At-Risk
Number                                       Costs        ported-      of Funds
                                                           Costs
07-1-001   Dallas Independent School            $91,216     $85,816             $0                $0
           district
07-1-002   Mathematica Policy Re-                    $0         $0              $0                $0
           search Institute
07-1-003   Triumph Tech, Inc.                   $80,740      $1,192             $0                $0
07-1-004   RPSC CAS Disclosure                       $0         $0              $0                $0
           Statement
07-1-005   Temple University – con-            $233,385         $0              $0                $0
           tract close out
07-1-006   Cost Impact Analysis for                  $0         $0              $0                $0
           Raytheon
07-1-007   Compuware Corporation               $345,492         $0              $0                $0
07-1-008   AGUNSA Embezzlement                       $0         $0              $0                $0
07-1-009   AGUNSA Internal Controls                  $0         $0              $0                $0
07-1-010   DCMA findings for Ray-                    $0         $0              $0                $0
           theon Noncompliance
07-1-011   American Institute of Math-        $2,089,952 $2,089,952             $0           $389,900
           ematics
07-1-012   University of Puerto Rico            $16,030      $7,546             $0                $0
           Mayaguez
07-1-013   California Institute of Tech-        $15,227         $0              $0                $0
           nology Effort Reporting
07-1-014   Nashville State Technical           $185,213    $36,901              $0           $115,638
           Community College
07-1-015   Supplemental schedule to            $560,376         $0              $0                $0
           #06-1-023 RPSC
07-2-001   NSF FY 2006 Financial                     $0         $0              $0                $0
           Statement Audit
07-2-002   NSF FY 2006 Special Pur-                  $0         $0              $0                $0
           pose Financial Audit
07-2-004   NSF’s FY2006 Manage-                      $0         $0              $0                $0
           ment Letter Report
            Total:                            $3,617,631 $2,221,407             $0           $505,538




                                                                                        57
Statistical Data



                                     NSF-Cognizant Reports

Report         Subject                                            Ques-    Unsup-    Cost
Number                                                            tioned   ported   Sharing
                                                                  Costs    Costs    At-Risk
07-4-001       American Institute of Physics                          $0       $0        $0
07-4-002       Samuel Roberts Noble Foundation, Inc.                  $0       $0        $0
07-4-005       Shodor Education Foundation                            $0       $0        $0
07-4-006       Fresno Unified School District                         $0       $0        $0
07-4-007       Fresno Unified School District                         $0       $0        $0
07-4-009       American Association of Physics Teachers               $0       $0        $0
07-4-010       US Civilian Research & Development Foundation          $0       $0        $0
07-4-011       Stark County Educational Service Center                $0       $0        $0
07-4-012       Austin Independent School District                     $0       $0        $0
07-4-013       Brownsville Independent School District                $0       $0        $0
07-4-014       Cleveland Municipal School District                    $0       $0        $0
07-4-015       Allegheny Intermediate Unit                            $0       $0        $0
07-4-016       Ordway Research Institute, Inc.                        $0       $0        $0
07-4-017       Milwaukee Public Schools                               $0       $0        $0
07-4-019       Keck Graduate Institute of Applied Life Sciences       $0       $0        $0
07-4-021       Texas A & M Research Foundation                        $0       $0        $0
07-4-022       Merck Institute for Science and Education              $0       $0        $0
07-4-023       American Geophysical Union                             $0       $0        $0
07-4-024       University Corporation for Atmospheric Research        $0       $0        $0
07-4-028       Associated Universities, Inc.                          $0       $0        $0
07-4-029       Associated Universities, Inc.                          $0       $0        $0
07-4-030       Shodor Education Foundation                            $0       $0        $0
07-4-031       Center for Image Processing in Education, Inc.         $0       $0        $0
07-4-032       Southwest Center for Educational Excellence            $0       $0        $0
07-4-033       American Geophysical Union                             $0       $0        $0
07-4-034       Austin Independent School District                     $0       $0        $0
07-4-035       Dallas Independent School District                     $0       $0        $0
07-4-036       Clark County School District-NV                        $0       $0        $0
07-4-037       WGBH Educational Foundation                            $0       $0        $0
07-4-038       New England Board of Higher Education                  $0       $0        $0
07-4-039       Town of Hudson-MA                                      $0       $0        $0
07-4-040       United States-Mexico Foundation for Science            $0       $0        $0
07-4-041       Institute for Genomic Research                         $0       $0        $0
07-4-042       Henry E. Huntington Library & Art Gallery              $0       $0        $0




            58
                                                        OIG Semiannual Report   March 2007



                                 NSF-Cognizant Reports

Report     Subject                                            Ques- Unsup-   Cost
Number                                                        tioned ported Sharing
                                                              Costs   Costs At-Risk
07-4-043   Harrisburg University of Science & Technology           $0     $0     $0
07-4-044   Keck Graduate Institute of Applied Life Sciences        $0     $0     $0
07-4-045   Merck Institute for Science and Education               $0     $0     $0
07-4-048   American Institute of Physics                           $0     $0     $0
           TOTAL:                                                  $0     $0     $0



                                 Other Federal Audits

Report                    Subject                  Questioned       Unsup-        Cost
Number                                               Costs          ported       Sharing
                                                                    Costs        At-Risk
07-5-020   University of Richmond                     $689,685            $0           $0
07-5-021   University of Georgia Research Foun-       $147,239            $0           $0
           dation
07-5-068   Illinois Institute of Technology                $735           $0            $0
07-5-069   State of Georgia                           $156,295            $0            $0
07-5-092   Nevada System of Higher Education             $6,837       $6,837            $0
07-5-095   Alfred University                           $95,549       $95,549            $0
07-5-096   Howard University                         $1,164,741     $326,917            $0
           Total:                                   $2,261,081      $429,303            $0




              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 fi-
      nal decision on the corrective action necessary for report resolution with six
      months of the report’s issue date. At the end of the reporting period there
      were eight reports remaining that met this condition. The status of recommen-
      dations that involve internal NSF management is described on page 56.




                                                                                59
Statistical Data


                                   INVESTIGATIONS CASE ACTIVITY
                                    (October 1, 2006 – March 31, 2006)

	        Civil/Criminal Investigative Activities

		                 Referrals to Prosecutors       	    7
		                 Criminal Convictions/Pleas				      1	
		                 Civil Settlements					              2	
		                 Indictments/Information				         1
		                 Investigative Recoveries			   $783,989.91

	        Administrative Investigative Activities

		                 Referrals to NSF Management for Action		                   4
		                 Research Misconduct Findings			                            7	
		                 Debarments						                                           2		
		                 Administrative Actions			                                  37	
		                 Certification and Assurance Actions25 	                    15
	
	


                                       Investigative Case Statistics

			                           			                    Preliminary	        Civil/Criminal	         Administrative

	        Active at Beginning of Period26 		                 103		              58			                      64	
	        Opened				                                        	 90		              24		  	                    36	
	        Closed					                                        108		              18			                      36	
	        Active at End of Period		                         	 85		              63			                      64	




                    25
                       NSF accompanies some actions with a certification and/or assurance requirement. For example,
                    for a specified period, the subject may be required to confidentially submit to OIG a personal
                    certification and/or institutional assurance that any newly submitted NSF proposal does not contain
                    anything that violates NSF regulations.
                    26
                       Last period we reported 57 C/C cases and 65 Admin. cases. During this period, an Admin case
                    was converted to a C/C case which accounts for the difference in the numbers.

            60
                                                          OIG Semiannual Report   March 2007


                 Freedom of Information Act and Privacy Act Requests

Our office responds to requests for information contained in our files under the freedom of
Information Act (“FOIA,” 5 U.S.C. paragraph 552) and the Privacy Act (5 U.S.C. paragraph
552a). During this reporting period:

 • Requests Received			                  20

 • Requests Processed			                 19

 • Appeals Received			                    0


Response time ranged between 1 day and 20 days, with the median around 14 days and the
average around 13 days.




                                                                                  61
                                                APPENDICIES

Reporting Requirements

Under the Inspector General Act, we report to the Congress every six months on the
following activities:

Reports issued, significant problems identified, the value of questioned costs and recom-
mendations that funds be put to better use, and NSF’s decisions in response (or, if none, an
explanation of why and a desired timetable for such decisions).
(See pp. 11, 53)

Matters referred to prosecutors, and the resulting prosecutions and convictions.
(See pp. 29, 60)

Revisions to significant management decisions on previously reported recommendations,
and significant recommendations for which NSF has not completed its response.
(See pp. 23, 59)

Legislation and regulations that may affect the efficiency or integrity of NSF’s programs.
(See p. 5)

OIG disagreement with any significant decision by NSF management. (None)

Any matter in which the agency unreasonably refused to provide us with information or
assistance. (None)




                                                                   63
Statistical Data




                   ACRONYMS

                   CASB		         Cost Accounting Standards Board
                   CFO		          Chief Financial Officer
                   COI		          Conflict of Interest
                   COV		          Committee of Visitors
                   DACS		         Division of Acquisition and Cooperative Support
                   DCAA		         Defense Contract Audit Agency
                   DD		           Deputy Director
                   DGA		          Division of Grants and Agreements
                   DIAS		         Division of Institution and Award Support
                   DoD		          Department of Defense
                   DOE		          Department of Energy
                   DoJ		          Department of Justice
                   ECIE		         Executive Council of Integrity and Efficiency
                   FASAB	Federal Accounting Standards Advisory Board
                   FFRDC	Federally Funded Research and Development Centers
                   FISMA	 Federal Information Security Management Act
                   FOIA		         Freedom of Information Act
                   FY		           Fiscal Year
                   GAO		          Government Accountability Office
                   GPRA		         Government Performance and Results Act
                   GSF		          Global Science Forum
                   GPG		          Grant Proposal Guide
                   IG 		          Inspector General
                   KMS		          Knowledge Management System
                   MIRWG	Misconduct in Research Working Group
                   MREFC	Major Research Equipment and Facilities Construction
                   NIH		          National Institute of Health
                   NSB		          National Science Board
                   NSF		          National Science Foundation
                   OIG		          Office of Inspector General
                   OMB		          Office of Management and Budget
                   OPP		          Office of Polar Programs
                   PCIE		         President’s Council on Integrity and Efficiency
                   PI		           Principal Investigator
                   PFCRA	Program Fraud Civil Remedies Act
                   QCR		          Quality Control Review
                   RPSC		         Raytheon Polar Services Corporation
                   SBIR		         Small Business Innovation Research
                   STC 		         Science and Technology Centers
                   USAP		         United States Antarctic Program
                   USI		          Urban Systemic Initiative
                   USP		          Urban Systemic Program


            64
     HTTP4J/www.nsf,govloig
To report fraud, waste, or abuse,
 call our hotline 1.800.428.2189