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 technolo-
gies; 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 Inspector
General Act of 1978, as amended. Because the Inspector General reports directly to the Na-
tional Science Board and Congress, the Office is organizationally independent from
the agency.
About the Cover...A July day in Antarctica. Photo by Zee Evans, NSF;
selected by Jen Agee.
Table of Contents
Executive Summary..................................................................5
OIG Management Activities..................................................... 7
FY 2007 Management Challenges................................................... 7
Legal Review.................................................................................... 7
Outreach........................................................................................... 8
Special Projects.............................................................................. 12
Audits & Reviews................................................................... 13
Significant Reports......................................................................... 13
Audit Resolution............................................................................. 24
Work in Progress............................................................................ 28
A-133 Audit Reports....................................................................... 29
Investigations........................................................................ 31
Civil and Criminal Investigations..................................................... 31
Administrative Investigations.......................................................... 35
Statistical Data........................................................................ 41
Appendicies............................................................................49
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From the Inspector General
This report highlights the activities of the National Science Foundation (NSF) Office of Inspec-
tor General (OIG) for the six months ending September 30, 2006. The past six months have
been a very busy time. We issued 21 audit reports and reviews that identified $25,415,769 in
questioned costs, and $1,900,000 in funds that could be put to better use. In addition, we closed
12 civil/criminal cases, 27 administrative cases, referred 4 cases to the Department of Justice for
prosecution, and recovered $910,097 in NSF funds as a result of our investigative efforts.
Our list of the most serious management challenges facing NSF in FY 2007 appears on page 49.
I am pleased to note that NSF continues to make significant progress on several longstanding
challenges. However, considerable work remains to be done in six critical areas: award admin-
istration; human capital; budget, cost and performance integration; information technology; the
U.S. Antarctic Program; and merit review. Within these six areas, we list 10 challenges that
remain from last year’s list, and one new challenge pertaining to enterprise architecture.
As the American Competitiveness Initiative (ACI) promises to commit significant additional
resources to the funding of scientific research over the next ten years, NSF must be prepared to
manage these additional investments. To support the agency, OIG will focus resources to help
ensure that NSF’s increasing investment in basic research is subject to appropriate oversight and
sound management controls.
In the past our audits have focused on many of the priorities identified in the ACI. For example,
we have issued a number of audit reports that examine NSF’s investment in “tools of science”,
i.e., large scale facilities and instruments that enable discovery and development. Pursuant to
our recommendations, NSF is in the process of reengineering its approach to planning, building
and managing these projects. Another series of recent audit reports, including one described on
page 15, have recommended improvements in the way NSF disseminates research results. These
changes should facilitate access to research findings, promote technology transfer, and accelerate
the process by which basic research enables the introduction of successful new technologies and
products. The ACI notes that the U.S. is operating within a changing global context in which
countries are pouring resources into their scientific and technological infrastructure. As NSF
attempts to leverage its investments by entering into a growing number of international partner-
ships, OIG has played a leadership role in establishing a dialogue among international orga-
nizations responsible for science research funding to discuss strategies for addressing mutual
accountability challenges, as noted on pages 8-9.
Finally, I would like to extend a warm welcome to the new members of the National Science
Board: Dr. Mark Abbott, Dr. Camilla Benbow, Dr. John Bruner, Dr. Patricia Galloway, Dr.
Jose-Marie Griffiths, Mr. Arthur Reilly, Dr. Thomas Taylor, and Dr. Richard Thompson. The
Office of Inspector General looks forward to working with them, along with our returning Board
members, and our new Board leadership, to continue NSF’s impressive record of accomplish-
ment with strengthened oversight of NSF’s stewardship of its resources.
Christine C. Boesz, Dr.P.H.
Inspector General
November 15, 2006
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Executive Summary
• An OIG audit report found that NSF constituents have an
interest in obtaining more information about NSF-funded re-
search. Organization executives and NSF program officers
interviewed expressed an overwhelming interest in having
NSF post brief summaries of research results and publica-
tion citations on its website. Interest was also indicated
in posting conference proceedings, abstracts of journal
articles, and final project reports. The report recommends
that NSF use its position on various government-wide com-
mittees to advocate for the inclusion of brief summaries in
project reports, which could be made available to the pub-
lic. In addition, the agency should consider posting other
formats, such as conference proceedings, journal abstracts,
and conference proceedings on its website. (See p. 15 )
• DCAA completed four audits of Raytheon Polar Services
Company (RPSC) in which it questioned $22.1 million of
RPSC’s fiscal year (FY) 2003-2004 final payment claim;
placed RPSC on notice that it must immediately file a
federally mandated cost accounting practices statement or
face administrative penalties; and identified internal control
failings in both the Colorado and New Zealand offices that if
not corrected, will require costly and extensive oversight by
NSF to ensure RPSC is adhering to federal regulations and
the NSF contract. In an earlier audit, $33.4 million, or 9.2
percent of the $363 million costs claimed by RPSC for the
three-year period ended December 31, 2002 were ques-
tioned by the auditors. (See p. 18 )
• Weaknesses in the University of Pennsylvania (UPENN)
effort reporting system prevented it from adequately sup-
porting a significant portion of labor charged to NSF grants
according to an OIG audit. The audit disclosed two major
systemic internal control deficiencies that affected UPENN’s
processes for accounting and charging labor effort costs to
NSF awards: 1) UPENN’s business managers were cer-
tifying labor effort reports, though they were not in a posi-
tion to know whether work was performed, and 2) effort
reports were not certified in a timely manner as specified
by UPENN policy. As a result, we estimated that UPENN
could not demonstrate that at least $9.2 million or 37 per-
cent of the $24.9 million of labor costs charged to NSF in
fiscal years 2002 through 2004 actually benefited NSF
awards as opposed to other federal or university activities.
(See p. 21 )
OIG Executive Summary
• An OIG investigation into embezzlement at a university revealed other
management control weaknesses that resulted in the recovery or de-ob-
ligation of $3,367,256 in NSF funds over a 3-year period. The investiga-
tion involved a university employee who was subsequently convicted of
embezzling more than $487,000 in university funds, including $415,000 in
NSF funds. In addition to finding evidence of embezzlement, investigators
discovered that the university certified to inaccurate cost-sharing contribu-
tions each year of the award, and could not support a number of expenses
charged to the NSF grant. (See p. 31)
• The U.S. Attorney for the Middle District of Tennessee indicted a former
professor at a state university on one count of wire fraud and one count of
mail fraud. The indictment alleges that the professor used employees fund-
ed by NSF grants to conduct work in furtherance of private consulting that
she performed through a company organized by one of her subordinates
at the university. The professor was the director of a university center that
received $5 million under a Local Systemic Change (LSC) grant from NSF
to support the training of local school systems in science instruction and
Hands-On Science programs. (See p. 32)
• NSF found that a PI and a co-worker committed research misconduct
based on an OIG investigation of plagiarism involving three Small Busi-
ness Innovation Research (SBIR) proposals. The PI, who worked for a
small company, initially admitted plagiarizing materials in all three propos-
als. However prior to adjudication, and after reviewing a copy of our in-
vestigation report, the PI identified a co-worker as the actual author of the
third proposal. NSF concluded that both individuals committed research
misconduct and required; (1) the PI to certify for a period of three years
that NSF proposals he submits do not violate NSF’s Research Misconduct
regulation, and (2) the co-worker to complete a course in research ethics.
(See p. 35)
OIG Management Activities
FY 2007 Management Challenges
The Office of Inspector General submitted its list of what it
considers to be the most serious management and perfor-
mance challenges facing the National Science Foundation to
agency management. The list is based on OIG audits and
investigative work, general knowledge of the agency’s opera-
tions, and the evaluative reports of others, such as the Gov-
ernment Accountability Office and NSF’s various advisory
committees, contractors, and staff. Ten challenges are drawn
from last year’s list, some of which reflect areas of fundamen-
tal program risk that are likely to require management’s at-
tention for years to come. One new management challenge
appears on this year’s list: enterprise architecture. The OIG’s
management challenges letter appears in its entirety in the
appendix on page 49.
Legal Review
The Inspector General Act of 1978, as amended, mandates
that our office monitor and review legislative and regulatory
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 pro-
mote economy, effectiveness, efficiency, and the prevention
of fraud, waste, abuse and mismanagement. 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 discus-
sion 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 currently excluded HIGHLIGHTS
from participation under the Act’s enforcement provisions.
PFCRA enables agencies to fully implement their statutory FY 2007 Management
mission to prevent fraud, waste and abuse by availing them- Challenges 7
selves of the enforcement capabilities contained within the Legal Review 7
Act.
Outreach 8
PFCRA sets forth administrative procedures that address Special Projects 12
allegations of program fraud when the claims are less than
OIG Management
$150,000. Currently, the U.S. Postal Service and the executive departments
identified in the Inspector General Act of 1978 are the only agencies permit-
ted to use PFCRA. NSF and the other agencies with Inspectors General
appointed by agency heads are not included.
We believe that using the enforcement provisions of PFCRA will enhance
NSF and other agency recoveries in instances of fraud that fall below PF-
CRA’s jurisdictional threshold of $150,000. In a March 2006 letter to Con-
gress, the National Science Board made a formal request “that Congress
amend the PFCRA to include NSF,” and provide the agency with its investi-
gative resolution authorities.
Outreach
NSF OIG continued to conduct outreach to NSF, the national and internation-
al research communities, and other federal agencies and their OIGs during
this semiannual period. We saw an increase in the interest shown for grant-
related oversight, particularly with the use of compliance programs. This
interest was most evident at numerous international meetings and forums,
where ideas were shared, questions asked, and advice sought on a broad
range of topics relating to fostering effective oversight of government grant
programs.
In conducting outreach activities, our intention is to inform and educate rel-
evant audiences about all aspects of our mission. Our specific message for
those institutions engaged in scientific research is that effective management
and control systems must be maintained throughout the constituent parts of
the research community, both to achieve technical compliance with federal
requirements and to enhance the research enterprise and contribute to its
success.
Working with Other Nations
Representing the U.S. at the Global Science Forum. As institutions from
around the world increasingly collaborate to conduct scientific research, it is
important that those who fund and perform research have an understanding
of the rules, regulations, and research ethics that prevail in other countries.
Because of her experience in dealing with issues of research misconduct,
the Inspector General was designated as the United States representative to
the Global Science Forum Expert Group.
In June, the Expert Group, which included representatives from 10 countries,
gathered to discuss the growing need for mutual understanding of research
misconduct issues and practical guidance for governments on research
misconduct and ethical training. The Group developed a proposal address-
ing these matters, and it was accepted by the Forum. The IG will be part of
a newly-formed steering committee that will meet again in Tokyo to consider
information gathered from various countries and experts in order to develop
international guidance on research misconduct issues.
OIG Semiannual Report September 2006
Stressing Research Accountability at INORMS
Conference. The NSF Inspector General was invit-
ed to speak at the International Network of Research
Management Societies in Brisbane, Australia. Her
presentation focused on the increasing number of al-
legations and research misconduct findings that have
international implications, and the need for close
coordination and consistent procedures for handling
research misconduct and for ensuring adequate ethi-
cal training of researchers. She called for the devel-
opment of national and international standards that
can be used to investigate allegations of research
misconduct. Dr. Boesz at the IN-
ORMS conference with
Yue Zhangdou, Na-
Co-hosting of International Accountability Workshop. The Account-
tional Natural Science
ability in Science Research Funding workshop was held last spring in The Foundation of China
Hague, Netherlands. The sessions were co-hosted by Dr. Boesz and Gert- and Jan Massey, Chair
jan Boshuizen of the Netherlands Organization for Scientific Research, and of the conference.
representatives of 11 countries attended. Topics included internal audit, risk
assessment, and risk management. Presenters from NSF included the Chief
Financial Officer, the Director of the Division of Grants and Agreements, and
the Associate Inspector General for Audit.
Delegation of Ministry of Supervision of P.R. China Visits OIG. Twenty-
two representatives of the Chinese Ministry of Supervision visited the NSF
OIG in September to meet with Dr. Boesz and Barry Snyder, Inspector Gen-
eral of the Federal Reserve Board. The IG presented information about how
Offices of Inspector General are organized and operate, as well as their role
and responsibilities. The delegation was particularly interested in how the in-
dependence of OIG is assured and how government corruption is prevented
and detected.
International Conference on Research Integrity. NSF OIG staff also
participated in a planning meeting for the 2007 International Conference
on Research Integrity in Portugal. The planning session, attended by 20
representatives from a number of countries and organizations, will facilitate
discussion of coordination on research misconduct and education on ethical
behavior. NSF OIG has participated in discussions with representatives from
Poland, Japan, and China while these representatives were visiting with their
NSF counterparts. During these discussions, we again learned of the grow-
ing international concern for addressing research misconduct and for devel-
oping consistent rules and expectations for training and enforcement.
Working with the Research Community
OIG Staff Participation in Conferences. Members of the OIG staff were
invited to participate in a wide range of workshops, conferences, meetings,
OIG Management
and other events conducted by institutions and associations of research
professionals. Participation in such events allowed OIG staff to address the
community in various forums and to discuss how best
to advance our common goal of ensuring integrity
and accountability in the operation of the research
enterprise. The purpose of our outreach presenta-
tions is to assist individuals and organizations within
the national and international research communi-
ties in their efforts both to create systems to identify,
resolve, and prevent recurrence of misconduct or
mismanagement, and to foster an environment of
ethical conduct in scientific research and grant ad-
ministration.
The IG discusses During this semiannual period, OIG staff participated
International in events sponsored by the Society of Research Administrators (SRA) In-
Accountability
ternational; the National Council of University Research Administrators; the
Workshop agenda
with Gertjam Foundation for Polish Science; the Korean Science and Technology Policy
Boshuizen of the Institute; the European Science Foundation; the Global Science Forum; the
Netherlands. Czech Science Foundation; the Japanese Ministry of Science and Technol-
ogy; and the Federal Audit Executive Council. In each of these forums, our
staff engaged a broad spectrum of the community involved with the provi-
sion, use, administration, and oversight of grant funds.
Presentations at Universities. Members of the NSF OIG continue to re-
ceive numerous invitations to provide training to, and answer questions from,
university officials and others involved in applying for and administering NSF
awards, performing supported research, or conducting university-level inqui-
ries into allegations of research misconduct. During this semiannual period,
we visited six universities or university systems for such presentations. In
each, the participants demonstrated great interest in the presentations and
engaged NSF OIG staff in constructive question-and-answer sessions to
refine their understanding of the subjects being discussed. In addition, we
participated in an event sponsored by the American Association of State Col-
leges and Universities.
Working with the Federal Community
Outreach on Grant Fraud. NSF OIG staff members interact with their
counterparts in the IG community on a regular basis. Our investigators led
efforts to educate the community about grant fraud and achieve a greater
understanding of the similar characteristics of grant fraud and procurement
fraud. OIG received increasing requests for our grant fraud investigators to
serve as instructors to other IGs, and we frequently met and worked with
individuals from a number of federal agencies and OIGs on a host of profes-
sional matters. These included presentations in conjunction with the Inspec-
tor General Academy and for OIGs at agencies including USDA, USAID, and
NASA. We participated in an event sponsored by the Metropolitan Washing-
ton Council of Governments, and we made a presentation to the Procure-
ment Fraud Working Group for the Eastern District of Virginia U.S. Attorney’s
10
OIG Semiannual Report September 2006
Office. These professional interactions were pursued both
on an office-to-office level, to address requests for par- Helping to Train the IG
ticular assistance, and within the context of the Council of Community
Counsels to Inspectors General and numerous committees
of the President’s / Executive Councils on Integrity and OIG is frequently invited to
Efficiency (PCIE/ECIE). NSF OIG continues to actively contribute to training events for
participate in the PCIE/ECIE Investigations Committee, the
others within the IG commu-
PCIE/ECIE Inspection and Evaluation Committee, and the
nity to share our experience in
PCIE GPRA Roundtable meetings.
handling research misconduct
Audit Outreach Activities. OIG auditors have met month- and grant fraud cases.
ly during this reporting period with auditors from a number
of other federal OIGs at the Financial Statement Audit During the last six months,
Network to review and comment on proposed accounting a team from NSF OIG pro-
standards and requirements for federal financial statement vided two training sessions on
audits, changes to the Government Auditing Standards, research misconduct investiga-
2006 Revisions (the “Yellow Book”), and the Federal Ac- tions to approximately 100
counting Standards Advisory Board’s Proposed Statement USDA OIG personnel during
of Federal Financial Accounting Concepts on Definition and that office’s National Profes-
Recognition of Element of Accrual-Basis Financial State- sional Development Confer-
ments. Additionally, we actively participated in interagency ence. Another NSF OIG team
workgroups focused on updating the GAO/PCIE Financial provided training on grant
Audit Manual, standardizing the government-wide state-
fraud investigations to United
ment of work used to procure the financial statement audit
States Agency for International
contractors, and updating the Audit Monitoring Guide that
assists OIGs in monitoring the quality of the financial audit Development OIG personnel
performed by the external auditors. during their training confer-
ence. A third OIG team
Working with NSF provided training at the IG
Academy as part of its Procure-
Participation in NSF briefings and seminars. Our work ment Contract and Grant
within NSF continues to advance our goal to improve OIG Fraud Training Program.
effectiveness by enhancing communications with agency
management and staff. During this semiannual period,
three OIG presentations were made to the National Science Board. We
also continued to speak at the conflict-of-interest briefings conducted by the
NSF ethics official approximately twice per month. Our participation allows
us to communicate directly with the majority of NSF employees about the
OIG mission and responsibilities, our ongoing liaison program with NSF, and
the channels through which employees can bring matters to our attention.
Another valuable forum for OIG outreach within the agency is the NSF
Program Manager’s Seminar. OIG staff gave presentations at each of these
seminars, which provide new NSF program managers with detailed informa-
tion about the Foundation and its activities. These sessions gave OIG staff
an opportunity to develop personal and professional relationships with their
NSF colleagues, as well as educate them about the role and activities of the
NSF OIG. Conversely, we also learn about new developments within NSF
program management.
During this semiannual period, we continued to build on our success in
establishing effective communications and professional relationships with
11
OIG Management
the individual directorates and offices within NSF through our liaison pro-
gram. OIG liaison teams (each normally consisting of an investigator and
an auditor) serve as a valuable conduit of information between our offices in
the course of approximately 30 liaison events. We also solicited ideas from
the individual directorates and offices for matters we should consider for OIG
review in the future.
Special Projects
Assistance in NSB’s Examination of Federal Policies Concerning Sup-
pression of Research Findings. At the request of the National Science
Board, the Inspector General surveyed her counterparts at agencies en-
gaged in science research to determine whether the issue of suppression
or distortion of research findings among scientists had surfaced in any OIG
audits, inspections or evaluations. The OIG requested information from
National Aeronautics and Space Administration, National Oceanic and At-
mospheric Administration, Fish and Wildlife Service, U.S. Geological Survey,
U.S. Department of Agriculture, Environmental Protection Agency, Depart-
ment of Energy, and Department of Health and Human Services. The OIGs
at these agencies had issued no reports that indicated scientific information
had been suppressed or distorted. This information helped the NSB respond
to a request from Senator John McCain for an examination of existing poli-
cies of federal science agencies regarding the suppression and distortion of
research findings and the impact of such actions.
Updating of Audit Position Descriptions. The Office of Audit updated 14
position descriptions, including its auditor and management analyst positions,
to include the skills and capabilities that have become necessary to perform
these jobs successfully, such as critical thinking and effective communica-
tion. The existing position descriptions, which were more than 15 years old,
were outdated and contained many irrelevant details. A team of OIG audi-
tors and management analysts worked with NSF personnelists to define new
core competencies and describe how each would be executed at the entry,
intermediate, journeyman, and senior level. By more clearly specifying what
the Office of Audit expects of auditors and management analysts at each
grade level, the new position descriptions will enable us to improve the hiring
process, identify training needs more effectively, and improve our ability to
coach and evaluate employees.
Coordination of the FY 2005 PCIE/ECIE Progress Report to the Presi-
dent. The President’s Council of Integrity and Efficiency and the Executive
Council of Integrity and Efficiency each year issue a report to the President
on the most significant activities and accomplishments of the federal In-
spectors General community. This year’s report was prepared jointly by the
Department of Agriculture and the National Science Foundation OIGs. In FY
2005, the Inspectors General identified $20 billion in potential savings gov-
ernment-wide, and completed investigations that resulted in 9,900 suspen-
sions and debarments of business and individuals for inappropriate activities
and 7,700 successful prosecutions. The report can be found at www.ignet.
com.
12
Audits & Reviews
Significant Reports
Fiscal Year 2005 Management Letter Re-
port Cites Need for Improved Financial
Management Practices
The FY 2005 Management Letter1 identified 17 findings
related to NSF’s financial reporting controls and operations,
12 of which were repeated from the prior year. As a result of
those findings, the Management Letter recommended that
NSF: continue to improve its contracts and post-award moni-
toring programs; expand its definition of improper payments;
seek guidance on the accounting treatment of post retirement
benefits at Federally Funded Research and Development
Centers (FFRDCs) and environmental clean-up costs in the
Antarctic; report outcome-oriented cost efficiency measures;
and develop accounting policies and procedures, including
policies and procedures for the review and approval of pur-
chase card transactions.
The Management Letter found continuing weaknesses in
NSF’s contracts and grants monitoring programs. For exam-
ple, NSF did not approve the FY 2005 annual program plan
of its largest advance-payment contractor, Raytheon Polar
Services Corporation, until the end of the fiscal year. The
auditors recommended that NSF approve contractors’ an-
nual program plans timely to prevent contractors from incur-
ring unauthorized costs. Further, NSF did not always obtain
timely annual cost incurred submissions on cost reimburs-
able contracts for which NSF is the contractor’s cognizant
agency. Since these contracts are initially based on cost
estimates, federal regulations require that contractors submit
cost incurred submissions within six months after the end of HIGHLIGHTS
the contractor’s fiscal year to promptly determine the actual
Significant Reports 13
cost of the contract for that year. The auditors recommended
that NSF ensure that all cost reimbursable contractors submit
cost incurred submissions and that NSF contracting officers Audit Resolution 24
review them timely.
Work in Progress 28
1
A management letter discusses findings identified during a financial statement
audit that warrant management attention, but are not material in relation to the A-133 Audit Reports 29
financial statements.
13
Audits & Reviews
For the fourth year the Letter found that NSF did not always receive timely
(or any) final project reports or annual progress reports; and in some cases
NSF approved new funding for an awardee that had not filed a required
annual progress report. The auditors recommended that NSF ensure that
these reports are received when they are due so that program performance
can be properly evaluated. Documentation serves as a key record of the
agency’s observations and efforts to monitor an awardee and is a valuable
source of information for management’s oversight of the program.
For the second year, the Management Letter identified weaknesses in NSF’s
process of estimating improper payments as required by the Improper Pay-
ments Information Act 2002 (IPIA). For testing purposes, NSF defined erro-
neous payments as “expressly unallowable” payments, thus excluding unal-
lowed, unallocable, or unreasonable costs as defined by IPIA. This limitation
increases the risk that NSF has not identified all erroneous payments, and
the auditors recommended that NSF use the IPIA’s more inclusive definition
of improper payments.
Also for the second year, the Management Letter recommended that NSF
seek guidance from the Federal Accounting Standards Advisory Board
(FASAB) to resolve two unusual issues. It suggests that NSF ask FASAB
how to account for post retirement benefits at Federally Funded Research
and Development Centers (FFRDC) 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 responsible for this
liability is correctly recognizing, recording, and reporting it. The Letter also
found that NSF needs to clarify its responsibilities for environmental clean-up
costs in the Antarctic. Although the treaty that governs NSF’s responsibilities
in the Antarctic states that NSF has responsibility for remediation of environ-
mental incidents, it does not appear to provide for concomitant liability. To
ensure that NSF prepares accurate financial statements, the auditors recom-
mended that NSF immediately ask FASAB how to account for clean-up costs
for which it has a treaty obligation but no apparent legal liability.
For the fifth year the Letter stated that NSF does not report basic outcome-
oriented cost efficiency measures, such as the cost of awarding or admin-
istering a grant, in its Performance and Accountability Report, but instead
reports on administrative cost savings resulting from new technology and/or
changes to business processes. Reporting both outcome-oriented cost ef-
ficiency measures and cost savings measures provides more useful informa-
tion to stakeholders about the efficiency of NSF’s internal grant-making and
administering processes. The auditors therefore again recommended that
NSF develop and report cost efficiency measures that relate to its output and
outcome goals.
The Letter also reiterated a prior recommendation that NSF document its
accounting policies and procedures. In addition, it recommended that NSF
14
OIG Semiannual Report September 2006
develop standard policies and procedures for the review and approval of pur-
chase card transactions. The lack of documented accounting policies and
procedures can result in inefficient and/or duplicative accounting procedures.
The lack of standard policies and procedures for the review and approval
of all purchase card transactions prior to payment can result in undetected
unauthorized purchases.
NSF management generally concurred with a number of the recommenda-
tions in the Management Letter, and the FY 2006 financial statement audit,
currently underway, is evaluating NSF’s actions in response to the findings
and recommendations to determine whether the issues have been resolved.
Constituents Want Expanded Access to NSF Re-
search Results
During this semiannual period we issued the last in a series of three audit
reports examining NSF’s policies and practices for reporting on and dissemi-
nating the results of the research it funds. This final audit report assessed
the interest among NSF’s constituents, including researchers, educators,
librarians, minorities, women, and journalists, for NSF making the results of
the research it funds available on its website. Representatives of 7 organi-
zations representing NSF constituents, as well as 18 NSF program manag-
ers, overwhelmingly supported NSF providing more research results on its
website. Furthermore, they stated that the best formats for conveying the
information were brief summaries of the research results and citations of the
journal publications resulting from the research. Based on the membership
of the organizations we interviewed, NSF could reach tens of thousands of
interested users by placing more results information on its website.
A key factor in furthering science and ensuring accountability for federal
research dollars is communicating the results of the scientific research.
Communicating research results may advance knowledge, stimulate new
research ideas, and interest future scientists, engineers, and educators. The
websites of federal agencies funding basic research can play an important
role in disseminating research results to scientists as well as other interested
constituents, such as educators or journalist. However, NSF has historically
only provided the public with information on proposed research, not results.
While NSF has recently begun planning to provide citations of journal articles
resulting from NSF-funded research on its website, the audit found that NSF
constituents were interested in even more information about research results.
In light of government-wide efforts to reform and standardize how research
results are reported by scientists to the federal agencies funding them, the
audit report recommended that NSF advocate for including brief summaries
of research results in the grant reporting template currently being developed.
NSF could then make the summaries available on its website. Additionally,
the report recommended that NSF consider providing links to the actual
15
Audits & Reviews
abstracts of journal articles resulting from NSF research. NSF agreed that
more research results should be made available and is examining the fea-
sibility of providing links to abstracts of journal articles on its website. The
agency is still considering the recommendation to advocate for including brief
summaries in the new standardized, government-wide reporting format.
Oversight of Awardee Indirect Costs Needs Improve-
ment
The OIG completed two audits during this semiannual period that assess
issues related to NSF’s oversight of indirect costs submitted by grantees.
Indirect costs, sometimes referred to as overhead, are expenses that pertain
to common administrative support activities, such as operation and mainte-
nance of buildings, payroll and accounting functions, and information tech-
nology services. Unlike direct costs, which are charged in their entirety to
awards, indirect costs are allocated based on an indirect cost rate that the
awardee institution negotiates with the federal government. Approximately
20 percent, or $1.1 billion of the $5.6 billion of costs budgeted on NSF grants
in FY 2006 are for indirect costs. Because of the significant dollar amount
of indirect cost charges to NSF grants, it is important that NSF ensures that
all awardee institutions correctly apply the federally negotiated rate, and NSF
properly negotiates the indirect cost rates for the approximately 90 organiza-
tions for which it is responsible. Proper management of awardee indirect
costs helps ensure that limited NSF funds achieve the maximum amount of
program results.
NSF Policy for University Indirect Cost Recovery Is Inconsistent with
Federal Grant Requirements
Contrary to federal grant requirements, NSF allows universities and colleges
to recover indirect costs utilizing rates negotiated subsequent to making
the initial grant award. Federal policy requires universities to use the rate
or rates in effect at the time of award throughout the life of each competi-
tive award in order to preserve the level of funds spent on research as op-
posed to administrative and facility support. Our review of 23 of NSF’s top
100 funded universities found the policies at 14 universities followed federal
requirements. However, University of California policy allowed its nine cam-
puses to use newly negotiated rates, as permitted by NSF policy, and three
of the campuses actually used the NSF option. As a result, these campuses
inappropriately shifted $1.9 million from direct research to administrative and
facility support over a nine-year period. Such reductions in funds support-
ing research could jeopardize the successful achievement of NSF research
objectives.
The federal requirement allows funding agencies to know with certainty the
total funds available for research throughout the award. Inconsistency be-
tween NSF’s policy and federal requirements has created confusion in the
awardee community regarding the appropriate indirect cost rate to charge
16
OIG Semiannual Report September 2006
on federal awards. NSF agreed with the audit recommendation to revise its
Grant Policy Manual provisions for recovering indirect grant costs to make
them consistent with the federal requirement by the end of this year.
More Comprehensive Process for Reviewing Indirect Cost Rates
Is Recommended
An audit of NSF’s procedures for reviewing indirect cost rate proposals
indicates that NSF could improve its process to identify overstated, incom-
plete or missing proposals. The audit revisited recent OIG audits of indirect
cost proposals for the period 1995 through 2002 submitted by 11 non-profit
institutions, analyzed the results, and found four problems common to most
of the proposals: overstated indirect costs, understated direct cost bases,
inadequate support for costs included in pools or bases, and untimely or
missing submission of indirect cost proposals. These problems occurred
because the institutions lacked an understanding of the federal requirements
for calculating indirect cost rates, were missing or had inadequate policies
to prepare indirect cost proposals, and had deficient accounting and/or time
and effort reporting systems. Without a reliable and comprehensive propos-
al review process, NSF risks negotiating inflated indirect cost rates resulting
in overpayment of indirect costs.
The audit also compared NSF’s proposal review process to guidance in
Office of Management and Budget (OMB) Circulars and four federal agen-
cies’ policies for reviewing indirect cost proposals and found that NSF can
do more to detect and prevent the recurring problems we found in our audits.
For example, NSF did not: 1) have a proposal review guide for its staff to en-
sure thorough and consistent examination of proposals; 2) obtain current in-
formation to assess the quality of awardees’ financial management systems
used to prepare indirect cost proposals; and 3) consistently maintain infor-
mation about prior indirect cost rate negotiations to facilitate trend analysis,
identify significant changes in indirect cost proposals, and help determine the
accuracy of the current proposals. Further, we found that institutions often
submitted late proposals or did not submit a proposal at all, preventing NSF
from determining if the rates used to charge indirect costs to federal awards
were current and accurate. Because NSF lacked a comprehensive process
for proposal review, it increased the risk of not detecting inflated indirect cost
proposals.
Accordingly, we recommended that the Director of the Division of Institution
and Award Support develop a risk-based program to review indirect cost
proposals. The program should include updated assessments of awardees’
financial management systems, maintenance of historical files on awardees’
prior rate negotiations, guidance for reviewers to use in processing submitted
proposals, and more effective tracking of proposal receipt and follow-up for
late proposals. In response to our findings, NSF agreed to continue to im-
prove its program for review and negotiation of indirect costs, and is develop-
ing a corrective action plan to address the report recommendations.
17
Audits & Reviews
Contract Audits
Audits of Polar Support Contractors
At NSF’s request, the OIG contracted with the Defense Contract Audit
Agency (DCAA), to complete a series of audits of the financial reports and
practices of Raytheon Polar Services Company (RPSC), the Antarctic sup-
port contractor, and VECO Polar Resources, the Arctic support contractor.
Combined, NSF spends approximately $130 million annually on these two
contracts to provide logistical and operational support for scientific research
performed in the polar regions. The OIG and DCAA issued five reports dur-
ing this semiannual period in support of this request.
Questioned Costs Rise to $55.5 Million in Audits of Raytheon Polar
Services Company as Additional Compliance and Control Problems
Are Found
RPSC provides science, operations and maintenance support to sustain year
round research in NSF’s United States Antarctic Program (USAP). During
this semiannual period, DCAA completed four audits of RPSC in which it
questioned $22.1 million of RPSC’s fiscal year (FY) 2003-2004 final payment
claim; placed RPSC on notice that it must immediately file a federally man-
dated cost accounting practices statement or face administrative penalties;
and identified internal control failings in both the Colorado and New Zealand
offices that, if not corrected, will require costly and extensive oversight by
NSF to ensure RPSC is adhering to federal regulations and the NSF con-
tract. In an earlier audit, $33.4 million, or 9.2 percent of the $363 million
costs claimed by RPSC for the three-year period
ended December 31, 2002 were questioned by the
auditors2.
DCAA questioned $22.1 million or 7.3% of the $300.7
million that RPSC claimed for payment for FYs 2003
and 2004. Of these costs $18.1 million were ques-
tioned because RPSC erroneously claimed indirect
costs as direct costs. After the auditors properly
reclassified the indirect costs, they questioned an ad-
ditional $2.5 million of indirect costs that exceeded the
limitations specified in the contract and $1.5 million
A view of Palmer of unallowable costs for alcohol, entertainment, sou-
Station, the small- venirs, and fringe benefits. The additional $22.1 million of questioned costs,
est of the three U.S. combined with the previously reported $33.4 million that was questioned for
Antarctic Program the same reasons during the audit of costs claimed for FY 2000 to 2002,
research stations.
brings the total questioned costs for the five-year period ending December
31, 2004 to $55.5 million. Of the questioned costs, $39.2 million, or 70 per-
2
September 2005 Semiannual Report, p. 15.
18
OIG Semiannual Report September 2006
cent, were indirect costs, which RPSC improperly reclassified and claimed
as “other direct costs” because they exceeded the contract ceilings.
By claiming indirect costs as direct costs, RPSC violated its federal Cost
Accounting Standards Board (CASB) disclosure statement. In response, on
August 22, 2006, the Department of Defense (DoD), which is responsible
for overseeing RPSC’s compliance with its CASB disclosure statement on
all federal contracts, issued a determination of noncompliance to RPSC’s
parent, Raytheon Technical Services Company (RTSC), for the three-year
period ending December 31, 2002. NSF is now pursuing administrative
processes to resolve the $39.2 million of improperly billed indirect costs from
RPSC.
In an audit of RPSC’s cost accounting disclosure statement, the auditors
found that contrary to federal requirements and its NSF contract, Raytheon
removed RPSC from its own CASB disclosure statement effective January 1,
2005, leaving RPSC to perform without any disclosure of its cost accounting
practices. When the auditors notified Raytheon of this violation, it submitted
a CASB disclosure statement for RPSC, retroactive to January 1, 2005. Un-
der this new disclosure statement, RPSC proposed to classify and bill some
of its direct and indirect costs consistent with practices that were previously
unauthorized under the prior disclosure statement. Accordingly, DoD re-
quested that RPSC provide an analysis of the additional costs that are likely
to result under this disclosure statement as a basis to decide whether to ap-
prove the recently proposed cost accounting practices.
Two other audits issued during this period identified significant internal
control weaknesses in RPSC’s Colorado and New Zealand financial man-
agement operations that contributed to the conditions that caused auditors
to question $55 million of claimed costs and could adversely affect future
RPSC billings to NSF. Specifically, RPSC Colorado does not adequately
train its employees to accurately identify, classify, and monitor restricted
funds and unallowable costs; adequately segregate the duties of billing pre-
parers, reviewers, and certifiers to prevent or identify billing errors; or have
written policies and procedures to reconcile expenditure reports to account-
ing records and monitor its subcontractors’ accounting and billing systems.
Auditors found similar deficiencies in the internal controls governing RPSC
New Zealand’s accounting and labor distribution systems. Expressly unal-
lowable costs for gifts, entertainment, and alcohol, amounting to $1.37 mil-
lion were charged to the NSF contract and $300,000 of labor costs annually
were improperly classified as “miscellaneous other direct costs,” resulting in
an understatement of total direct labor costs incurred by RPSC and reported
to NSF. In addition, payroll accounting duties were not properly segregated,
increasing the risk that undetected billing errors could occur; and poor con-
trols existed over employee timesheet certification, review and approval.
These deficiencies could result in inaccurate charges to NSF’s contract.
19
Audits & Reviews
The audit reports recommended that NSF continue to coordinate with DCAA
and DoD to have RPSC correct its cost accounting practices and preclude
charges exceeding its indirect cost ceilings. In addition, the reports recom-
mended NSF recover the questioned costs plus interest and ensure that
RPSC establishes adequate policies and procedures, including an internal
compliance oversight program and an employee training program. The
reports also recommended that NSF ensure RPSC maintains adequate
documentation; conducts periodic reviews of its billing process; informs
personnel of the NSF contract requirements; and monitors its subcontractors
accounting, timekeeping and billing systems. NSF is reviewing the recom-
mendations and is working with RPSC and DoD to address the findings and
recommendations, including the $55 million in questioned costs. In the next
semiannual period, DCAA will begin a review of the $122 million of costs
claimed by RPSC for FY 2005, and complete its audit of the new proposed
RPSC CASB disclosure statement.
Audit of Major Arctic Contractor Identifies $2.6 Million of Inadequately
Supported Labor Costs
Similar to RPSC, VECO Polar Resources (VPR) provides logistics support
services to NSF’s Arctic research program. DCAA audited $21.9 million of
costs claimed by VPR for the three-year period ending March 31, 2003 and
found that timesheets used to capture the daily hours worked by the employ-
ees were not routinely signed by employees and supervisors to ensure their
completeness and accuracy. As a result, the auditors were unable to provide
an opinion on the accuracy of the $2.6 million in labor costs charged to the
NSF contract. In addition, DCAA questioned $17,200 of unallowable bonus
costs awarded to VPR employees because VPR did not have an established
bonus plan or a prior written agreement as required by federal regulations to
ensure that bonuses paid were fair and equitable.
The auditors recommended that NSF direct VPR to develop and implement
adequate timekeeping policies that ensure compliance with federal and NSF
requirements for charging labor and bonus costs to the NSF contract. VPR
responded that it had revised its timekeeping policies and procedures but did
not agree that the bonus costs should be questioned. NSF is reviewing the
audit recommendations. DCAA will complete its audit of VPR’s CASB dis-
closure statement for adequacy and compliance with government contracting
regulations in the next semiannual period.
Grants Audits
Awardees Lack Understanding and Policies to Man-
age NSF Funds
In audits issued during this semiannual period of three universities, two cen-
ters, and two non-profit organizations, we estimated that $9.2 million of labor
20
OIG Semiannual Report September 2006
costs charged to NSF awards may not have benefited those awards, ques-
tioned $2.9 million of cost sharing and $750,000 of NSF-funded costs, and
found that a grantee’s proposed indirect cost rate was 13 percentage points
higher than its actual rate. These problems occurred because grantees had
inadequate accounting controls, time and effort systems, policies and proce-
dures, or understanding of federal and NSF requirements. To follow up on
our findings and recommendations we have forwarded the audit reports to
NSF’s Division of Institution and Award Support to resolve any questioned
costs and ensure corrective action.
Subawardee Oversight at Two Science and Technology Centers Needs
Improvement
Financial audits of the Center for the Sustainability of semi-Arid Hydrology
and Riparian Areas (SAHRA) at the University of Arizona and the Center for
Behavioral Neuroscience (CBN) at Georgia State University both identified
a significant weakness in subawardee oversight. Neither Center monitored
their subawardees to ensure that claimed costs were accurate, allowable,
allocable, and properly documented per federal and NSF regulations. As
a result, we questioned $335,187 of subaward cost share expenditures and
$19,751 of NSF-funded subaward costs for which neither the SAHRA Center
nor its subawardee could provide adequate supporting documentation. Simi-
larly, for the CBN, we questioned $271,376 of subaward cost share expendi-
tures and $132,835 of subaward costs. In addition, our audit identified other
compliance and internal control weaknesses contributing to an additional
$32,986 in questioned costs at the SAHRA Center and $55,573 at the CBN.
We recommended that both the University of Arizona and Georgia State
University develop and implement written policies and procedures to as-
sess and document each subawardee’s risk of claiming non-allocable or
non-allowable costs, including cost sharing expenditures. The Universities
should perform their reviews of each subawardee’s invoices and cost-shar-
ing expenditures consistent with the subawardee’s risk assessment to ensure
amounts claimed are allowable, allocable, and properly documented. We
also made several recommendations pertaining to the other compliance and
internal control weaknesses identified in the audit. Generally, the University
of Arizona agreed with the audit recommendations and indicated that it has
initiated corrective actions. Georgia State University agreed to consider
but did not commit to implementing, our recommendation that it establish a
risk-based subawardee monitoring program. The University partially agreed
with the remaining recommendations and submitted additional information to
support the costs.
Systemic Weaknesses Found in University’s Effort Reporting System
An OIG audit found that weaknesses in the University of Pennsylvania
(UPENN) effort reporting system prevented it from adequately supporting a
significant portion of labor charged to NSF grants. The audit disclosed two
21
Audits & Reviews
major systemic internal control deficiencies that affected UPENN’s processes
for accounting and charging labor effort costs to NSF awards: 1) UPENN’s
business managers were certifying labor effort reports, though they were not
in a position to know whether work was performed, and 2) effort reports were
not certified in a timely manner as specified by UPENN policy. As a result,
we estimated that UPENN could not demonstrate that at least $9.2 million or
37 percent of the $24.9 million of labor costs charged to NSF in fiscal years
2002 through 2004 actually benefited NSF awards as opposed to other
federal or university activities. These weaknesses raise concerns about the
reasonableness of the labor effort charges on UPENN’s other $525 million of
federal awards.
These problems occurred because UPENN did not have specific procedures
to help business managers understand the actions necessary to verify work
was performed as shown on effort reports, and Department Chairs were
not held accountable for ensuring the timely completion of effort reports. In
addition, UPENN did not conduct a federally required independent evalua-
tion of its payroll distribution system to ensure the system’s effectiveness in
distributing salary and wage costs to all activities, including individual spon-
sored projects. In response to our audit, UPENN revised its effort report-
ing policies and procedures to require business managers to obtain written
after-the-fact documentation from Principal Investigators (PIs), clarified its
policy regarding the documentation needed to support salaries, and as-
signed Department Chairs responsibility for the timely completion of effort
reports prepared by their faculty and staff. UPENN also agreed to conduct
an independent review in FY 2007 to determine whether its new electronic
effort reporting system and revised policies and procedures are working as
intended. We recommended that NSF follow-up with UPENN to determine
whether the review meets federal requirements.
Consortium Is Unable to Track Costs on NSF Grants
The Consortium of Universities for the Advancement of Hydrologic Science,
Inc. (CUAHSI) did not have a financial management system that provided a
complete accounting of its three NSF awards amounting to $2.9 million, ac-
cording to a recent OIG audit report. Specifically, CUAHSI could not identify
funds authorized, spent, or remaining by individual award and did not have
the capability to compare budgeted to actual costs. As a result, CUAHSI
overspent one award and overcharged NSF for another. It also caused NSF
to delay funding a hydrologic project and restrict the consortium’s payments,
thereby increasing NSF’s administrative burden. Furthermore, CUAHSI
could not readily locate source documents and claimed questionable costs of
$69,978, approximately one-half of which were related to the director’s hous-
ing allowance. These issues occurred because CUAHSI lacked a qualified
accountant and did not ensure that its personnel were knowledgeable about
federal rules for allowable costs and accounting controls. In its response,
CUAHSI agreed to reimburse almost half of the questioned costs, as well as
implement all of our recommendations to improve its accounting over NSF
22
funds.
OIG Semiannual Report September 2006
Museum’s Indirect Cost Rate is Overstated
Auditors found that the process used by the North Carolina Museum of Life
and Science to prepare its fiscal year 2003 indirect cost proposal was not
in compliance with federal grant requirements. The Museum did not have
adequate written procedures to prepare its indirect cost rate or to ensure that
only allowable costs were included in its calculation. As a result, we calcu-
lated that the Museum’s FY 2003 indirect rate should have been 30 percent
as opposed to 43 percent. If the recommended 30 percent rate had been
applied to one of the three NSF grants audited, NSF could have reduced its
indirect cost funding by $139,175 for the subject award and realized signifi-
cant savings that could have been redirected. The audit also identified four
other internal control issues: cost sharing reporting deficiencies, time keep-
ing system weaknesses, improper allocation of compensated absences, and
improper accounting for fixed assets. In its written response, the Museum
accepted most of the monetary audit adjustments and agreed with all of the
recommendations to improve internal controls over NSF funds.
University Control Deficiencies Result in Poor Grant Oversight and
Award Overcharges
An audit of $3 million awarded to New Mexico Highlands University (NMHU)
found that the University had systemic weaknesses affecting the oversight
of its NSF grant funds. In particular, NMHU’s internal controls were not
adequate to properly administer, account for, and monitor its NSF awards
in compliance with NSF and federal grant requirements in the areas of cost
sharing, subawardee monitoring, expenditure reporting, and conflict of inter-
est statements.
NMHU could not readily identify in its accounting records or provide ad-
equate documentation to support $1.9 million (90 percent) of the $2.1 million
in cost sharing it claimed to NSF. Likewise, NMHU lacked adequate poli-
cies and procedures to monitor and ensure the allowability of $2.2 million of
subawardee costs, although subaward costs represented 73 percent of the
total claimed costs. Subsequent on-site testing at two NMHU subawardees
allowed the auditors to determine that all of the subawardee costs charged to
the NSF grant except $81,787 were allowable. However, without better over-
sight practices NMHU cannot ensure that subaward costs on other or future
NSF awards are allowable.
Additionally, NMHU inaccurately reported its award costs to NSF because it
did not reconcile claimed costs with its official books of record. This internal
control deficiency resulted in NMHU reimbursing NSF $46,458 for over-
charges. The auditors also questioned $60,000 for materials and supplies
purchased at the very end of the grant period that did not appear to have
benefited the NSF award; $12,720 of travel, material and supplies, and con-
sultant costs which lacked supporting documentation; $6,276 of salary costs
23
Audits & Reviews
charged to an NSF award for a professor who did not work on the grant; and
$4,689 of scholarship costs paid for students who were not eligible to par-
ticipate in the NSF program. Finally, contrary to its conflict of interest policy,
NMHU could not provide conflict of interest disclosure statements for either
the PIs or Co-PIs for any of its NSF awards.
The report recommended that NMHU establish a system to identify, account
for, monitor, report, and document cost sharing and establish a system,
including policies and procedures, to monitor the allowability of subaward
costs claimed to NSF. The report also recommended that NMHU develop
and implement policies and procedures that enable it to report actual costs
incurred for NSF grants to NSF as recorded in its official books and records
and maintain conflict of interest disclosure forms for all PIs and Co-PIs.
NMHU generally agreed with the audit recommendations and indicated that it
has initiated corrective actions.
University Receives Qualified Opinion
A financial audit of a $9.8 million award to the University of Hawaii (UH)
resulted in a qualified opinion because management was unable to provide
its actual labor cost sharing contributions. UH used budgeted percentages
to charge labor time and effort cost sharing without making any adjustments
to reflect changes in actual workload over the five-year period of the award.
Therefore, the accuracy of $1.7 million or 39 percent of the total $4.3 million
of labor cost sharing charged over the five-year period of the award, could
not be verified. In addition, auditors questioned $265,000 of subcontractor
costs and $305,000 of subcontractor cost sharing, which was not document-
ed.
Accordingly, the auditors recommended that UH revise its procedures to
claim actual rather than budgeted amounts for labor cost sharing. The audi-
tors also recommended that UH clarify and update its policies and proce-
dures for accounting for cost sharing and ensure that adequate documenta-
tion for all subcontract costs and subcontractor cost sharing is maintained.
UH generally concurred with the findings and recommendations and plans to
amend its labor cost sharing policies and procedures.
Audit Resolution
University Works to Improve Accountability over
Grant Funds
A prior audit of $10 million awarded on five NSF grants to Howard Univer-
sity found that the institution lacked a system of internal controls to provide
reasonable assurance that grant funds were being used for the purpose for
24
OIG Semiannual Report September 2006
which they were awarded3. Significant weaknesses were identified in the
University’s internal controls over cost sharing, funds passed-through to sub-
awardees, faculty salaries, and student stipends. The audit determined that
the University could not support $12.3 million of claimed cost sharing due to
the lack of documentation and the commingling of funds. Howard University
also lacked comprehensive subaward agreements legally obligating its sub-
recipients to provide $5.4 million of cost sharing and to restrict $2.3 million of
funding to participant support and/or trainee costs.
Howard University has undertaken concerted efforts to implement the audit
report recommendations. It has issued a new operations manual establish-
ing policies and procedures for managing and monitoring federal grants and
has initiated a major reorganization of the University’s research enterprise.
To oversee research, the Board of Trustees has approved a new organiza-
tion that will be managed by a cabinet-level Vice-President for Research and
Compliance. It also engaged a consultant to assist the University in estab-
lishing an appropriate structure for managing the research enterprise, and to
help establish effective grant administration controls.
NSF’s Division of Institution and Award Support (DIAS) is working with How-
ard University to develop an appropriate corrective action plan for implement-
ing the audit recommendations. Furthermore, to address the University’s
systemic internal control weaknesses that affect all federal grant funds, DIAS
is coordinating its audit resolution efforts with the cognizant audit agency, the
Department of Education, and the largest federal sponsor of research fund-
ing, the Department of Health and Human Services. NSF has provided both
of these federal agencies with copies of the audit report and the University’s
proposed corrective action plan. Furthermore, it has proposed a joint site
visit with these federal agencies to validate the progress made toward imple-
menting the corrective action plan.
NSF Secures a Fundraising Strategy from a Foreign
Awardee
An audit of NSF awards to the Inter-American Institute for Global Change
Research in Brazil, disclosed that NSF, on behalf of the United States, was
funding a disproportionate share of the Institute’s total research costs, and
that the Institute had not properly managed its NSF-funded subawards, val-
ued at over $10 million4. NSF provided technical assistance and conducted
two site visits to Institute offices to ensure implementation of the audit re-
port recommendations. In addition, NSF worked closely with other member
countries to hire a new Executive Director and require the development of
a fundraising plan to ensure the Institute’s continued financial viability. NSF
will also monitor the Institute’s progress in implementing its fundraising plan.
These combined corrective actions should position the Institute to better
manage its most recent $10.4 million NSF award.
March 2006 Semiannual, Report, pp. 17-18.
3
September 2004 Semiannual Report, pp. 17-18.
4
25
Audits & Reviews
OIG Audit Results in Recovery of $639,996
NSF sustained $639,996 of the costs questioned during an audit of San
Francisco Unified School District (SFUSD) completed in March 20065. The
district lacked the required employee certifications and personnel activity
reports to support claimed salary and fringe benefit costs, and an adequate
system to properly identify and account for the cost sharing contributions
it reported to NSF. SFUSD also did not conduct timely reconciliations of
the costs it claimed to NSF with its accounting records to ensure the valid-
ity of those costs. Of the $9.2 million SFUSD claimed on its NSF award,
auditors questioned $712,620, including $69,315 of salaries and associated
fringe benefit costs that should have been charged to SFUSD’s general fund,
$427,844 of costs that were not recorded in SFUSD’s accounting records,
and $215,445 for overcharges of indirect costs.
In response to the audit, SFUSD indicated that it has developed policies to
assure the proper accounting for cost sharing and indirect costs, enhanced
its procedures for reconciling costs reported to NSF with its accounting
records, and implemented time certification and labor effort reporting proce-
dures. SFUSD also reported that it will train staff and hold quarterly meet-
ings to ensure correct charges are made to NSF awards. NSF will conduct
a follow-up review to ensure that SFUSD has fully implemented its corrective
action plan prior to awarding it any new funding.
School District Charged $100,000 for Failure to
Properly Document Cost Share Expenses
As a result of an OIG audit, NSF imposed a $100,000 disallowance on
Fresno Unified School District (FUSD) for failure to properly document cost
shared expenditures.6 The school district had lacked adequate records to
support meeting its $17.5 million cost sharing commitment for the period
ending August 31, 2000. As a result of this material weakness, the auditors
questioned $6.8 million of NSF’s share of total project costs. The audit also
questioned $220,000 of indirect costs because FUSD did not accurately cal-
culate or consistently charge its indirect cost rate.
In addition to the disallowance, NSF also agreed to advise FUSD in writing of
the need to take corrective actions including: implementing proper systems
to identify, track, and report cost sharing and participant support costs; en-
5
March 2006 Semiannual Report, p. 16.
6
March 2005 Semiannual Report, p. 19.
26
OIG Semiannual Report September 2006
suring that employees maintain proper documentation to support salary and
wage charges in compliance with federal and NSF requirements; and pro-
viding training to appropriate personnel to properly calculate indirect costs.
Also, NSF will conduct a preaward review, to ensure that the issues identified
in the audit have been corrected before making any future awards to FUSD.
School District Corrects Internal Control Deficiencies
In the September 2005 Semiannual we reported on our audit of the School
District of Pittsburgh (SDP).7 SDP did not have a system to ensure accurate
and timely completion of labor effort certifications and could not adequately
account for cost sharing. Both of these material weaknesses were also
reported in a July 1997 OIG audit of SDP. We questioned $900,000, or 21
percent, of salaries and wages and related fringe benefit and indirect costs
claimed under the award. We also questioned $2.1 of the $4.6 million of cost
sharing claimed and identified another $800,000 of cost sharing as “at risk”
of not being met, primarily because SDP could not verify that the costs were
incurred for the benefit of the NSF awards.
NSF agreed with all of our compliance and internal control recommenda-
tions to correct the repeated findings. Subsequently, NSF verified that SDP
had revised its internal policies and procedures to rectify these deficiencies.
During audit resolution, NSF also sustained $7,696 in questioned salary and
fringe and participant support costs and accepted alternative documentation
for the remaining questioned costs.
Audit Findings Prompt Improvements at College
During a 2004 audit of Northwest Indian College (NWIC), the auditors ques-
tioned all of the $1.1 million of direct costs claimed and the entire $35,000 of
cost sharing required on two expired awards.8 They also found that NWIC
lacked an adequate financial management system for recording the receipt
and expenditure of funds for NSF projects and did not have source docu-
mentation to support the costs charged to NSF projects.
As a result of the audit, NSF visited NWIC to provide award management as-
sistance and oversight. NSF found that NWIC had hired an accounting firm
to perform required federal audits for FYs 2002 to 2004 and help NWIC iden-
tify and organize the documentation to support its claimed NSF costs. NSF
did not sustain any of the questioned costs because the agency’s program
officers confirmed that NWIC satisfactorily completed the work performed
under the awards. NSF agreed to further review NWIC if it is considered for
future funding.
7
September 2005 Semiannual Report, p. 16.
8
September 2004 Semiannual Report, pp. 18-19.
27
Audits & Reviews
Work In Progress
Labor Effort at Universities
As reported in our September 2005 Semiannual Report,9 OIG initiated a
review to assess the adequacy of accounting and reporting processes for
labor costs at NSF’s top-funded universities. The review was initiated as a
result of the growing number of disputes involving overcharges of staff time
amounting to millions of dollars at several major universities as evidenced by
legal actions brought by various federal agencies and reported in the media.
In addition, approximately one third of all NSF award funds provided to uni-
versities are spent for salaries and wages. As part of the review, we issued
an audit report on the labor effort practices at the University of Pennsylva-
nia10 and are completing an audit at the California Institute of Technology.
We anticipate awarding contracts to independent public accounting firms by
the end of October 2006 to audit the labor effort practices at another five
universities.
National Single Audit Sampling Project
In November 2004 the Inspector General community undertook a govern-
ment-wide initiative to assess the quality of audits performed under OMB
Circular A-133. Our office actively participates on both the project’s advisory
board and its management staff, because of the importance of A-133 audit
quality to NSF’s post-award administration efforts, particularly in monitoring
the approximately $5 billion of awards it funds annually. In this semiannual
period, federal and state auditors along with public accounting firms under
contract completed their quality control reviews of 208 A-133 audits, which
were statistically selected from a universe of over 30,000 audits. When the
project’s management staff completes its analysis of the review results, its
assessment of quality will be used to improve audit guidance to the public
accounting firms performing A-133 audits. We anticipate a report will be is-
sued during the next semiannual period.
Review of Pension and Medical Benefits at NSF Fed-
erally Funded Research and Development Centers
(FFRDCs)
Our office initiated an audit to determine the reasonableness of pension
and medical benefits provided at five FFRDCs, which manage some of NSF
largest facilities and programs. We hired a consulting firm to assist in identi-
9
September 2005 Semiannual Report, p. 20.
10
See P. 21 of this Semiannual Report.
28
OIG Semiannual Report September 2006
fying the value of the pension and medical benefits provided to retirees and
current employees. The consultant compared the benefits provided to em-
ployees at these FFRDCs with those offered at other similar institutions and
evaluated the accuracy of the FFRDCs’ $85 million liability for retiree medical
benefits. We are currently reviewing the consultant’s draft report.
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 have 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 $2.5 million
of questioned costs. The findings contained in A-133 reports help identify
potential risks to NSF awards and are useful to both the agency and OIG in
planning site visits, post-award monitoring, and future audits. Because of the
importance of A-133s in monitoring grantees, the OIG returns reports that
are judged inadequate to the firms that prepared them.
Findings Related to NSF Awards
In this reporting period, we reviewed 43 audit reports, covering NSF expen-
ditures of over one billion dollars from fiscal year 2003 through 2005. These
reports revealed 67 instances where grantees failed to comply with federal
requirements and 14 instances where weaknesses in grantees’ internal
controls could lead to future violations. The auditors questioned a total of
$2.5 million of the costs claimed by recipients of NSF awards. As detailed in
the following table, the most common violations were related to financial and
award management and salary and wage requirements.
29
Audits & Reviews
Findings Related to NSF Awards by Category
Category of Type of Finding
Finding
Compliance Internal Controls Monetary Total
Financial and Award 19 6 25
Management
Salary/Wages 7 1 5 13
Procurement System 7 2 2 11
Subawards 8 1 9
Other 6 1 7
Property Manage- 2 2 4
ment System
Travel 2 1 1 4
Cost-Sharing 2 1 1 4
Indirect Costs 4 4
Equipment 3 3
Consultant Services 2 2
Fringe Benefits 1 1
Materials & Supplies 1 1
Other Direct Costs 1 1
TOTAL 63 13 13 89
We also examined 21 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 be-
come more serious over time if not addressed.
30
Investigations
Civil and Criminal Investigations
Embezzlement Investigation Uncovers
Additional Issues with the University’s
Cost-Sharing and Award Accountability
An OIG investigation into embezzlement at a university re-
vealed other management control weaknesses that resulted
in the recovery or de-obligation of $3,367,256 in NSF funds
over a 3-year period. The investigation involved a university
employee who was subsequently convicted of embezzling
more than $487,000, including $415,000 in NSF funds. In ad-
dition to finding evidence of embezzlement, investigators dis-
covered that the university certified to inaccurate cost-sharing
contributions each year of the award, and could not support a
number of expenses charged to the NSF grant
The university informed NSF that it had returned all of the
funds embezzled from the NSF grant, and requested that
NSF close the original award and transfer the remainder of
the award to another university. However, our investigation
revealed that the university had not returned $1,486,098 of
NSF grants funds before closing the award, funds that NSF
de-obligated and used for other purposes.
OIG worked with the U.S. Attorney’s Office for the Eastern
District of Virginia to negotiate a settlement with the univer-
sity that required it to reimburse $809,477 to the government.
The settlement agreement also included provisions requiring
the university to establish a compliance program to ensure
future adherence to federal requirements and regulations
and to provide annual reports to NSF on the progress and
success of the program for a period of three years. In total,
$3,367,256 were put to better use by NSF or credited to the
U.S. Treasury as a result of the investigation, including funds
that were either returned by the university or de-obligated by HIGHLIGHTS
NSF over a 3-year period.
Civil & Criminal
Investigations 31
Administrative
Investigations 35
31
Investigations
Former Professor Indicted for Mail, Wire Fraud
The U.S. Attorney for the Middle District of Tennessee indicted a former pro-
fessor at a state university on one count of wire fraud and one count of mail
fraud. The indictment alleges that the professor used employees funded
by NSF grants to conduct work in furtherance of private consulting that she
performed through a company organized by one of her subordinates at the
university.
Before her recent retirement, the professor was the director of a university
center that received $5 million under a Local Systemic Change (LSC) grant
from NSF to support the training of local school systems in science instruc-
tion and Hands-On Science programs. As part of the LSC grant, experi-
enced public school teachers were paid to work at the center implementing
the various training programs related to the grant. Our investigation found
that during the same time, the professor performed for-profit consulting
through a private consulting business organized by one of her subordinates
at the center. The consulting projects included an external evaluation of the
success of another LSC grant, and Hands-On Science training provided to
a public school system. The professor received approximately 75% of the
funds paid to the private consulting business.
The indictment charges that the professor caused center staff to submit
travel vouchers and make other representations that they were engaged in
official university and/or NSF grant work when in fact the professor knew that
the employees were providing services for projects to her for-profit consulting
business. Our investigation found that most of the center employees did not
know that the for-profit company existed or that they were performing work
for the private consulting firm. We also found that the professor did not dis-
close her outside consulting activities in annual Conflict-of-Interest disclosure
forms she submitted to the university.
In a press release announcing the indictment, the U.S. Attorney observed:
“There is nothing wrong with faculty members doing outside consulting and
being paid for their services. That said, faculty members administering
federal grants must follow the appropriate conflict of interest rules and may
not use federally-funded employees to further their own paid consulting work
while representing that those employees are performing their usual duties
under the federal grant. When this plain distinction is not honored, federal
criminal sanctions are the appropriate response.”
Scientist and His Company Debarred by NSF for
Five Years
NSF debarred a scientist and his company from directly or indirectly ob-
taining the benefits of federal grants for a period of five years. The debar-
ment was based on a criminal conviction and civil settlement resulting from
32
OIG Semiannual Report September 2006
a multi-agency fraud investigation related to grants and contracts that the
scientist received from the Small Business Innovation Research (SBIR) pro-
grams at NSF, the National Aeronautics and Space Administration, and the
Departments of Air Force, Energy, and Agriculture.11
NSF Debars Employee of Grant Recipient Who
Embezzled Non-Federal Funds
An accounting assistant at a grantee institution was charged with 18 felony
counts of grand theft and forgery for embezzling approximately $130,000 in
non-federal funds. The employee pled guilty to all counts and was subse-
quently convicted and sentenced. NSF concurred with our recommendation
to debar the individual for three years because, although the funds were not
federal, she had been responsible for processing payments for federal and
non-federal awards. Moreover, her job history made it reasonable to expect
that she will likely seek similar accounting positions in the future.
Improperly Used Participant Support Funds
Refunded to NSF
Two investigations into misuse of participant support funds allocated in NSF
awards resulted in the return of funds and commitments by the grantee to
improve grant oversight. The first investigation concluded that a Massachu-
setts organization failed to provide proper oversight of the NSF award funds.
Neither the organization nor the PI had applied for or obtained approval from
the NSF program officer to reallocate the participant support funds, as they
were required to do. The organization refunded $24,083.83 to NSF and the
organization’s Comptroller stated that for future awards the organization will
create a separate account for each NSF award and monitor all spending on
a monthly basis.
The second investigation found that a Utah university failed to provide guid-
ance to the PI or exercise proper oversight of two NSF awards, with the
result that participant support funds were not used for the stated purpose
of promoting collaboration with foreign scientists. We determined that the
collaboration with the foreign scientist had not taken place during the first
award, and neither the university nor the PI had applied for or obtained the
approval to reallocate the participant support funds for another use, as re-
quired. The university reimbursed NSF more than $19,000 and pledged that
“the Office of Sponsored Projects will review all award letters carefully and
make sure the project Information Sheet submitted to departments is accu-
rately prepared.”
11
March 2006 Semiannual Report, p.27
33
Investigations
Investigation of Export Technology Results in Refund
of NSF Funds
NSF received a refund of $33,718 from a university
for questionable charges to a grant following an
investigation into a violation of U.S. export regula-
tions. After receiving allegations that a university
scientist used NSF funds to develop and export
technology to a restricted country, we initiated an
investigation in cooperation with the Department of
Homeland Security Immigration and Customs En-
forcement (ICE) and the Department of Commerce
Office of Export Enforcement (OEE). The scientist,
through the university research center, received
funding from industrial institutions that reside in
countries that can receive only limited U.S. technol-
Matt Quinn, Head of ogy. The scientist also received NSF grants to develop industrial technology
Investigations retired and to participate in student exchange programs with a foreign university.
in June after 23 years
of federal service. ICE and OEE found the technology that the scientist sent to the foreign
institutions was not restricted for that country. However, OIG’s investiga-
tion found that the scientist used NSF funds to support a graduate student
whose research was provided to the foreign industrial institutions. Although
the scientist claimed that the original research of the student was useful to
the NSF project, the student’s research was not included in NSF progress or
final reports. The scientist combined NSF-funded trips related to the student
exchange program with meetings related to the foreign industrial institutions,
but did not separately account for the NSF meetings.
The university cooperated with the investigation and returned $33,718 to
NSF for questionable expenses charged to the NSF grants. The university
also counseled the scientist regarding the handling of federal program funds
and is reviewing procedures for managing research projects at the universi-
ty’s research center.
Agency Responds to Research Misconduct Recom-
mendation and Management Implication Report
We previously12 summarized the case of the owner of a company receiving
SBIR awards from NSF who had misrepresented the results of an award and
had submitted altered letters of support. We recommended that NSF make
a finding of research misconduct and take appropriate action. NSF manage-
ment determined that the individual’s actions were improper but did not rise
to the level of research misconduct, and NSF elected not to take any action
beyond sending a letter of reprimand.
12
March 2006 Semiannual Report, p.29.
34
OIG Semiannual Report September 2006
As a result of the investigation, we submitted a Management Implication
Report recommending that NSF provide additional guidance to applicants
regarding the submission of letters of support. NSF responded that it would
include more specific guidance in upcoming revisions to both the Grant Pro-
posal Guide and the Proposal and Award Manual scheduled to be published
this Fall.
Administrative Investigations
Actions by the Deputy Director
NSF Concluded That Small Business PI
Committed Plagiarism
In our last Semiannual Report,13 we discussed our investigation of alle-
gations that a PI employed by a New Jersey company plagiarized text in
two SBIR proposals he submitted to NSF. Based on our investigation and
recommendations, NSF found that the PI committed research misconduct
and sent him a letter of reprimand. The agency also required him to certify
completion of a course in scientific ethics, specifically plagiarism, within one
year, and required him to certify that any proposals he submits to NSF as a
PI or co-PI for the next three years do not contain plagiarized, fabricated, or
falsified information.
In the course of our investigation, we determined that a second scientist at
the company was the author of another NSF proposal that contained pla-
giarism. The scientist admitted he authored the proposal, but claimed that
his use of copied text was an unintentional mistake. We concluded that the
PI should have known of the importance of providing proper attribution to
copied text. We recommended that NSF make a finding that the scientist
committed research misconduct. NSF agreed and sent the scientist a letter
of reprimand, directing him to certify to OIG that he completed a course in
research ethics within one year of the final disposition of the case.
PI’s Pattern of Plagiarism Continues During OIG
Investigation of His NSF Proposals
A PI in Michigan continued to copy text from other sources into additional
NSF proposals during the course of our ongoing investigation of plagiarism
in four of his previously-submitted proposals. We had referred an investiga-
tion of four previously-submitted proposals to the PI’s university, which con-
cluded that all but one of the passages that we initially identified as copied
material were plagiarized, constituting a “violation of the institutional standard
of scholarly integrity.” The university required remedial training for the PI but
13
March 2006 Semiannual Report, p.32.
35
Investigations
did not make a finding of research misconduct because they stated there
were no well-defined standards regarding plagiarism and that the copying
was of the “low level” type.
We did not agree with the university’ conclusion and therefore proceeded
with our own investigation, including a review of the PI’s subsequent NSF
proposals. We identified three additional proposals containing copied mate-
rial, two of which included the same text that we identified as copied into one
of the proposals in our initial inquiry. We concluded that there were well-
defined standards in the subject’s scientific discipline and his actions consti-
tuted research misconduct.
Based on our recommendation, NSF made a finding of research misconduct;
required the PI to certify completion of an ethics course covering research
misconduct before applying for NSF funding; required the PI, each time he
submits a proposal or report to NSF for five years, to certify and provide as-
surances from his employer that the submissions do not contain plagiarized,
fabricated, or falsified material; and barred the PI from participating as a
reviewer of NSF proposals for three years.
Reports Forwarded to the Deputy Director
PI Provides False Evidence to Refute
Allegation of Plagiarism
A professor at a New York university altered electronic files to create false
evidence in support of his claim that he did not commit plagiarism. Our re-
view of three proposals submitted to NSF by the professor revealed that over
80% of each proposal was text apparently copied from other sources. Most
of the duplicated text, in two of the proposals, was from an NSF proposal
written by other researchers which had been posted on the web. The dupli-
cated text in the third proposal was drawn from professional reports of cur-
riculum innovation and assessment in the field. None of the verbatim mate-
rial offered in any proposal appeared in quotation marks or was differentiated
from the PI’s original text.
The PI claimed the NSF FastLane electronic proposal submission process
removed quotation marks and citations that were present in the documents
he submitted to NSF. However, we reviewed the original documents and
determined that they did not contain quotation marks and citations.
We referred the investigation to the PI’s university, which concluded the PI
committed research misconduct. The PI appealed that decision, and pro-
vided the university with a computer hard drive that he claimed contained
exculpatory evidence. The university arranged for a forensic analysis of the
contents of the hard drive, which provided direct evidence that the PI altered
files on the hard drive in an effort to support his false claims regarding the
copied text.
36
OIG Semiannual Report September 2006
We recommended that NSF: conclude the subject committed research mis-
conduct; debar him from receiving federal funds for a period of five years;
require him to certify that proposals or reports he submits to NSF do not
contain plagiarized, falsified, or fabricated material for three years after the
debarment period; require that he submit assurances by a responsible of-
ficial of his employer that any proposals or reports submitted by the subject
to NSF do not contain plagiarized, falsified, or fabricated material for three
years after the debarment period; and bar him from serving as a reviewer of
NSF proposals for five years.
NSF-Funded Postdoctoral Fellow Falsifies Research Data
An OIG investigation concluded that an NSF-funded postdoctoral fellow (the
PI), at a New England institution, falsified data in a published article. The
falsified data were subsequently cited by other researchers in the field.
The university notified us that it had completed an inquiry and found suffi-
cient evidence to warrant a detailed investigation. However, after we referred
our investigation to the university, the university reopened the inquiry, at the
behest of the PI’s attorney, and reversed its decision to recommend a full in-
vestigation. Because our review of the evidence did not support the rationale
for closing the matter, we proceeded with our investigation. We determined
that the PI was responsible for the collection of the data and the selection
of the data published in a journal article, and identified two distinct sets of
experiments during which the instrument controls were improperly adjusted
by the PI to create the desired data.
We recommended that NSF: make a finding of research misconduct; debar
the PI for two years; require him to certify to NSF that the publication con-
taining 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 for three years after the debarment period the PI each
time he submits a proposal or report to NSF to certify and provide assuranc-
es from his employer that the submissions do not contain plagiarized, fabri-
cated, or falsified material; and bar the PI from participating as a reviewer of
NSF proposals for three years.
PI Ignores Warning to Remove Plagiarized Text From His Proposal
A PI from a New England institution plagiarized text in two NSF proposals,
disregarding an admonition from two different colleagues about the copied
text. OIG received an allegation of plagiarism, determined it was substan-
tive, and referred the matter to the institution. The institution’s investigation
committee found the PI had shared a copy of his draft proposal with a
scientist, requesting that she provide comments to improve the proposal.
The scientist told the PI that he had inappropriately copied text from her
funded NSF proposal. The scientist also asked another colleague to review
37
Investigations
the PI’s proposal. The other colleague told the PI that he should rewrite
those sections before submitting the proposal to NSF.
Despite these warnings, the PI submitted his proposal with few changes from
the draft version and this proposal was eventually funded by NSF. In addi-
tion, the investigation committee discovered the PI had submitted an earlier
NSF proposal that contained plagiarized text from another successful NSF
proposal submitted by a different scientist.
The institution concluded the PI committed research misconduct when he
plagiarized text in the proposals. The institution: returned the funds for the
awarded proposal to NSF; reprimanded the PI; prohibited him from submit-
ting proposals from the institution for about 1½ years; and required him to
take ethics training.
We concluded the PI committed research misconduct and we recommended
that NSF: send the PI a letter of reprimand informing him that NSF has made
a finding of research misconduct against him; debar the PI from receiving
federal funds for a period of two years; require the PI to certify that proposals
he submits to NSF do not contain plagiarized, falsified, or fabricated material
for three years after the debarment period; require the PI to submit assuranc-
es by a responsible official of his employer that any proposals submitted by
the PI to NSF do not contain plagiarized, falsified, or fabricated material for
three years after the debarment period; prohibit the PI from reviewing NSF
proposals for a period of two years, concurrent with the debarment period;
and require the PI to complete a course in research ethics within one year of
the final disposition of the case.
Institution Proposes Termination of PI for Plagiarism
A PI at a Northeast institution plagiarized text from several source docu-
ments into an NSF proposal and was recommended for termination by the
institution’s adjudicator. During our investigation, the PI admitted that he
copied the materials. Based upon the evidence we provided, the institution’s
investigation committee concluded the PI committed research misconduct.
The institution’s adjudicator endorsed the findings and the conclusion of the
committee, but rejected its recommended actions, instead proposing to ter-
minate the subject’s employment at the institution.
We accepted the institution’s report as accurate and complete. We recom-
mended NSF send a letter of reprimand to the PI informing him that NSF has
made a finding of research misconduct and 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.
38
OIG Semiannual Report September 2006
Plagiarism Found in University Professor’s Dissertation
An OIG investigation concluded that a PI from New Jersey plagiarized text
from multiple source documents into two proposals he submitted to NSF.
We referred the investigation to the institution, which confirmed the subject
plagiarized the text we discovered during our inquiry. The university also
uncovered eight pages of plagiarized text in the subject’s dissertation. The
subject’s institution referred the dissertation matter to the degree-granting
institution, but, concluded that the copied text in his NSF proposals and his
dissertation were part of a pattern of plagiarism.
We concurred with the institution’s conclusions and recommended NSF:
make a finding of research misconduct; send the subject a letter of repri-
mand; require the subject to certify for two years that his proposals do not
contain plagiarism; and direct the subject to complete a research ethics
course.
PI Copies from 53 Sources into Three Proposals
A faculty member at a university in Tennessee submitted three proposals
to NSF that contained text copied verbatim from multiple sources. Using
plagiarism detection software, we identified approximately 160 lines of text
in the three proposals that were apparently copied from 53 sources. When
questioned, the PI accepted responsibility for the copied text in two of the
three proposals, but said his co-PI was responsible for the third proposal.
Because the co-PI denied responsibility, we referred the allegation to the
university for investigation, which concluded the PI committed plagiarism in
the disputed proposal. The university was unable to take action against him
because he had taken a position at a different university.
We agreed with the university’s conclusions and recommended NSF: make
a finding of research misconduct; send a letter of reprimand; and, for a pe-
riod of three years from final resolution of this case, require the PI to certify
in writing that any documents submitted to NSF are free of any misconduct.
PI Resigns Faculty Position Over Plagiarized CAREER Proposal
A professor at a Texas university resigned from his tenure-track position after
an investigation concluded that he plagiarized text into his NSF CAREER
proposal. His claim of a one-time careless action was contradicted by the
appearance of the same plagiarized text in his two previously submitted
CAREER proposals. The university conducted an investigation and found
additional plagiarized text in proposals submitted to other federal agencies.
The university determined that the subject’s actions constituted scientific
misconduct.
39
Investigations
As a result of the university’s investigation, the professor resigned from
his tenure-track faculty position and was appointed to an annually renew-
able non-tenure track position. The university also required the professor
to complete research ethics training and certify that proposals submitted in
the future meet rigorous standards of scholarship. We concurred with the
university’s assessment and recommended that NSF: make a finding of re-
search misconduct; send a letter of reprimand; and require certifications from
the subject for two years that his proposals submitted to NSF do not contain
plagiarized materials.
Other Significant Administrative Cases
Protecting the Confidentiality of Merit Review
During this semiannual period, our office reviewed several allegations re-
lated to violations of NSF’s merit review process. We closed one such case
and three others are still being investigated. In the case that was closed,
six unfunded NSF proposals were found on the website of a graduate stu-
dent whose advisor had served as an NSF panelist for all six proposals. We
found that these documents inadvertently became publicly available due to
an IT security error at the institution, and the graduate student agreed to im-
mediately expunge the proposals from the server. We also learned that the
panelist had provided the proposals to the graduate student for limited review
of issues within the graduate student’s area of expertise. Our investigation
concluded that there was no intent to place these proposals on a public web-
site, and there was no allegation or evidence of subsequent plagiarism. We
counseled the panelist on the importance of adhering to the NSF confidenti-
ality form that he signed, and he made assurances that this would not occur
again.
In three other matters that we are currently investigating, NSF panelists have
allegedly either directly plagiarized, or shared the proposal with another
individual who subsequently plagiarized, from NSF proposals that had been
reviewed. Two such matters have been referred to institutions for investiga-
tion, and the other is still in the OIG inquiry stage. We will discuss the find-
ings related to these matters in a future report.
40
Statistical Data
Audit Reports Issued with
Recommendations for Better Use of Funds
Dollar Value
A. For which no management decision $0
has been made by the commence-
ment of the reporting period
B. Recommendations that were issued $1,900,000
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 $0
made within 6 months of issuance
41
Statistical Data
Audit Reports Issued with Questioned Costs
Number of Questioned Unsupported
Reports Costs Costs
A. For which no management 24 $47,452,894 $4,731,498
decision has been made by
the commencement of the
reporting period
B. That were issued during the 18 $25,415,769 $2,231,707
reporting period
C. Adjustment related to prior <1> <$326,935> $0
recommendations
Subtotal of A+B+C 41 $72,541,728 $6,963,205
D. For which a management 23 $11,936,665 $4,709,167
decision was made during
the reporting period
i) dollar value of disallowed N/A $884,109 N/A
costs
ii) dollar value of costs not N/A $11,052,556 N/A
disallowed
E. For which no management 18 $60,605,063 $2,254,038
decision had been made
by the end of the reporting
period
For which no management deci- 5 $35,231,448 $22,331
sion was made within 6 months
of issuance
42
OIG Semiannual Report September 2006
Audit Reports Involving Cost-Sharing Shortfalls
Number of Cost-Shar- At Risk of Actual Cost
Reports ing Prom- Cost Shar- Sharing
ised ing Short- Shortfalls
fall (Ongo- (Completed
ing Project) Project)
A. Reports with monetary 5 $18,914,667 $940,046 $8,115,327
findings for which no
management decision
has been made by the
beginning of the reporting
period:
B. Reports with monetary 2 $11,372,117 $606,563 $0
findings that were issued
during the reporting pe-
riod:
C. Adjustments related to 0 $0 $0 $0
prior recommendations
Total of reports with cost shar- 7 $30,286,784 $1,546,609 $8,115,327
ing findings (A+B+C)
D. For which a management 4 $18,684,126 $940,046 $8,107,226
decision was made during
the reporting period:
1.Dollar value of cost-shar- N/A N/A $0 $100,000
ing shortfall that grantee
agreed to provide
2.Dollar value of cost- N/A N/A $940,046 $8,007,226
sharing shortfall that man-
agement waived14
E. Reports with monetary 3 $11,602,658 $606,563 $8,101
findings for which no
management decision has
been made by the end of
the reporting period
14
Indicates the dollar value waived by management primarily due to additional documentation
provided during audit resolution to support the questioned amounts.
43
Statistical Data
Status of Recommendations that Involve Internal NSF Management Operations
Open Recommendations (as of 9/30/2006)
Recommendations Open at the Beginning of the Reporting Period 86
New Recommendations Made During Reporting Period 22
Total Recommendations to be Addressed 108
Management Resolution of Recommendations15
Awaiting Resolution 34
Resolved Consistent With OIG Recommendations 74
Management Decision That No Action is Required 0
Final Action on OIG Recommendations16
Final Action Completed 34
Recommendations Open at End of Period 74
Aging of Open Recommendations
Awaiting Management Resolution:
0 through 6 months 20
7 through 12 months 7
More than 12 months 7
Awaiting Final Action After Resolution
0 through 6 months 2
7 through 12 months 9
More than 12 months 29
15
“Management Resolution” occurs when the OIG and NSF management agree on the corrective
action plan that will be implemented in response to the audit recommendations.
16
“Final Action” occurs when management has completed all actions it agreed to in the
corrective action plan.
44
OIG Semiannual Report September 2006
List of Reports
NSF and CPA Performed Reviews
Report Subject Questioned- Unsup- Better Use Cost Sharing
At-Risk
Number Costs ported- of Funds
Costs
06-1-009 University of Arizona Sci- $52,737 $52,267 $0 $335,187
ence & Technology Center
06-1-010 University of Pennsylvania $27,121 $0 $0 $0
Effort Reporting System
06-1-011 Raytheon Polar Services $0 $0 $0 $0
Company Failure to Dis-
close
Cost Accounting Practices
06-1-012 Raytheon Polar Services $0 $0 $0 $0
Company Billing System
Internal Controls
06-1-013 Geoff Haines-Styles $7,908 $7,691 $0 $0
Productions, Inc.
06-1-014 Maytech $14,089 $0 $0 $0
06-1-015 Consortium of Universities $69,978 $5,253 $0 $0
for the Advancement of
Hydrologic Science, Inc.
06-1-016 Baltimore County Public $16,522 $0 $0 $0
Schools
06-1-017 Raytheon Polar Services $0 $0 $0 $0
Company –New Zealand
Accounting System & La-
bor Floor Check Reviews
06-1-018 VECO Rocky Mountain, $17,200 $0 $0 $0
Inc. FY 2002/2003 In-
curred Costs
06-1-019 North Carolina Museum of $305 $0 $0 $0
Life & Science
04-1-020 University of Hawaii $265,449 $265,449 $0 $0
06-1-021 New Mexico Highlands $165,472 $94,507 $0 $0
University
06-1-023 Raytheon Polar Services $22,112,521 $0 $0 $0
Company FY2003/2004
Incurred Costs
06-1-024 Georgia State University $174,846 $164,534 $0 $271,376
06-2-006 NSF’s FY 2005 Manage- $0 $0 $0 $0
ment Letter Report
06-2-011 Review of NSF Policy on $0 $0 $1,900,000 $0
University Facility & Ad-
ministrative Cost Rates
06-2-012 Summary of Eleven Indi- $0 $0 $0 $0
rect-Cost Audits
06-2-014 Federal Information $0 $0 $0 $0
Security Management
Act FY2006 Independent
Evaluation
06-2-015 FY2006 Federal Informa- $0 $0 $0 $0
tion Security Management
Act Independent Evalua-
tion
Total: $22,924,148 $589,701 $1,900,000 $606,563
45
Statistical Data
NSF-Cognizant Reports
Report Subject Ques- Unsup- Cost
Number tioned ported Sharing
Costs Costs At-Risk
06-4-028 Divergence, Inc. $0 $0 $0
06-4-002 Michigan State University $0 $0 $0
Total: $0 $0 $0
Other Federal Audits
Report Subject Questioned Unsup- Cost
Number Costs ported Sharing
Costs At-Risk
06-5-028 Chief Dull Knife College $3,494 $0 $0
06-5-077 Massachusetts Institute of $447 $0 $0
Technology
06-5-078 The University of Notre Dame DuLac $12 $0 $0
06-5-079 State of Texas $11,080 $0 $0
06-5-083 State of Florida $834,582 $0 $0
06-5-084 University of Maine System $1,642,006 $1,642,006 $0
Total: $2,491,621 $1,642,006 $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 final
decision on the corrective action necessary for report resolution with 6 months
of the report’s issue date. At the end of the reporting period there were five
reports remaining that met this condition. The status of recommendations that
involve internal NSF management is described on page 44.
46
OIG Semiannual Report September 2006
INVESTIGATIONS CASE ACTIVITY
(April 1, 2006 – September 30, 2006)
Preliminary Civil/Criminal Administrative
Active Cases at
Beginning of Period 63 44 55
Opened Cases 176 25 37
Closed Cases 136 12 27
Active Cases at
End of Period 103 57 65
INVESTIGATIONS CASE STATISTICS
Referrals to DOJ 4
Criminal Convictions/Pleas 1
Civil Settlements 1
Administrative Actions 22
Investigative Recoveries $910,097.65
Research Misconduct Findings 4
Cases Forwarded to NSF
Management for Action 11
47
Statistical Data
INVESTIGATIONS CASE STATISTICS (Continued)
Assurances and Certifications17
Number of Cases Requiring Assurances During This Period 5
Number of Cases Requiring Certifications During This Period 6
Assurances Received During This Period 0
Certifications Received During This Period 0
Number of Debarments in Effect During This Period 9
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:
We received 23 FOIA requests. We responded to 22 with a
response time that ranged between 1 day and 20 days, with
the median around 6 days and the average around 7 days.
We received 2 Privacy Act requests.
We received 1 appeal which was denied.
17
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 certifica-
tion and/or institutional assurance that any newly submitted NSF proposal does not contain anything
that violates NSF regulations.
48
APPENDICIES
Appendix 1
Management Challenges Letter
October 16, 2006
To:
Dr. Steven C. Beering
Chair, National Science Board
Dr. Arden Bement
Director, National Science Foundation
From:
Dr. Christine C. Boesz
Inspector General, National Science Foundation
Subject:
Management Challenges for NSF in FY 2007
In accordance with the Reports Consolidation Act of 2000,
I am submitting our annual statement summarizing what the
Office of Inspector General (OIG) considers to be the most
serious management and performance challenges facing the
National Science Foundation (NSF). We have compiled this
list based on our audit and investigative work, general knowl-
edge of the agency’s operations, and the evaluative reports
of others, such as the Government Accountability Office and
NSF’s various advisory committees, contractors, and staff.
This year’s management challenges are organized under six
broad issue areas: award administration; human capital; bud-
get, cost and performance integration; information technolo-
gy; U.S. Antarctic Program; and merit review. Ten challenges
are drawn from last year’s list, some of which reflect areas of
fundamental program risk that are likely to require manage-
ment’s attention for years to come. One new management
challenge appears on this year’s list: enterprise architecture.
We note that NSF continued to make progress this past year
on several difficult challenges.
If you have any questions or need additional information,
please call me at 703-292-7100.
49
Appendicies
Award and Contract Administration
Post-award administration policies. Since FY 2002, independent au-
dits of NSF’s financial statements have repeatedly cited weaknesses in the
agency’s monitoring of grantee institutions, after an award is made, as a
major deficiency. In response, NSF has revamped its policies pertaining to
post-award administration and has made continued progress in establishing
a risk-based program for monitoring its 35,000 ongoing grants. In FY 2006,
NSF initiated a new program for performing desk reviews of all high-risk
institutions that did not receive site visits. The desk reviews extend NSF’s
monitoring program to all awardee institutions considered high-risk, closing
a significant gap in its coverage. However, OIG is not yet able to evaluate
the effectiveness of the post-award program NSF has implemented. It is too
soon to assess the desk reviews, and the quality of the documentation as-
sociated with the site visits continues to be inconsistent.
Meanwhile, the monitoring of programmatic performance is also a concern.
NSF provides limited guidance to program officers on how to oversee pro-
grammatic performance of awardees, and offers little or no formal training on
the administrative and financial requirements contained in OMB Circulars or
NSF grant conditions. An effective post-award monitoring program should
ensure that 1) awardees are complying with award terms and conditions and
federal regulations 2) adequate progress is being made toward achieving
the objectives and milestones of the program; and 3) expenditures listed on
NSF’s financial statements are accurate.
Cost-sharing commitments by the institutions have become less of an issue
since the National Science Board decided to eliminate non-statutory cost-
sharing requirements in 2004, but commitments that pre-date that policy
change continue to pose problems. Our most recent Semiannual Report, for
example, described two school districts and a university that lacked systems
to document and track a total of $42 million of claimed cost sharing. In ad-
dition, OIG investigations of two universities that falsely reported cost-shar-
ing contributions were recently settled with substantial repayments of award
funds to NSF. The challenge for NSF in the remaining cost-sharing obliga-
tions, as in the other aspects of post-award administration, is to ensure that
awardees live up to their commitments.
Management of large infrastructure projects. NSF’s administration of
large, state-of-the-art infrastructure projects, such as telescopes and super-
computing databases, poses an unusual project management challenge.
Two OIG audits that were issued in 2000 and 2002 found weaknesses in the
financial controls surrounding the funding and operation of these projects.18
Since then, NSF has steadily strengthened its oversight of large infrastruc-
Audit of the Financial Management of the Gemini Project, December, 2000, OIG 01-2001 Audit of
18
Funding for Major Research Equipment and Facilities, May, 2002, OIG 02-2007
50
OIG Semiannual Report September 2006
ture projects. A Deputy Director for Large Facilities
Projects was appointed in 2003, but until recently had
trouble obtaining the staffing, resources and authority
needed for the new Large Facility Projects Manage-
ment & Oversight Office (LFP) to carry out its man-
date of conducting post-award oversight of business
operations, financial and internal control systems,
and project management at large NSF-funded facili-
ties. In the past year, the LFP has grown to include
four permanent full-time staff. The agency has also
implemented a system for tracking budgeted costs for
Major Research Equipment and Facilities Construc-
tion (MREFC) projects. However, NSF has not yet
addressed OIG recommendations for a system that identifies, records and Installation of the Gemini
tracks the total costs of major equipment and facilities. In addition, correc- North telescope.
The Gemini facility is an
tive actions to ensure the appropriate use of the MREFC accounts. and the international partnership
implementation of good project management methods is still incomplete. for which NSF acts as the
executive agency.
In May 2006 NSF’s Business and Operations Advisory Committee recom- Credit: NOAO/AURA NSF
mended, among other things, that NSF: 1) arrange for annual reviews of
NSF-led large facilities by an expert group that includes outside peer con-
sultants; 2) conduct formal risk assessments of each of its facilities; and 3)
implement a process for identifying how the facility will meet future research
needs and for projecting its eventual termination, along with the associated
costs and legal requirements.19 These recommendations are similar to
those pertaining to post-award administration in past OIG reports and the
independent audits of the agency’s financial statements. Given the annual
investment of more than $200 million in large research facilities and equip-
ment, they remain a challenge for the NSF managers responsible for MRE-
FC oversight.
Contract Monitoring. NSF does not adequately review public vouchers
submitted by contractors who receive advance payments, according to the
last two independent audits of NSF’s financial statements. In both cases,
this deficiency was identified as a reportable condition. The most recent
audit identified significant gaps in NSF’s policies pertaining to contract ad-
ministration. In FY 2006, the agency obligated approximately $214 million
through advance payments to three contractors, the largest being for logisti-
cal support of the United States Antarctic Program. Without a proper review,
NSF’s advance payments may be subject to error or impropriety. In fact,
recent cost-incurred audits by the Defense Contract Audit Agency (DCAA)
have identified $55 million in questioned costs over the past five years from
just one contractor. Federal law requires that responsible officials check the
Report by the Facilities Subcommittee of the NSF Business and Operations Advisory Committee,
19
June 10, 2006
51
Appendicies
public vouchers for accuracy and propriety to ensure that the reported costs
are authorized under the contract. To correct the situation, NSF has con-
tracted with DCAA to review vouchers submitted by its larger contractors
on a regular basis. These reviews were initiated too late in the fiscal year to
evaluate their effectiveness, so we will continue to identify contract monitor-
ing as a management challenge.
Promoting integrity. OIG has experienced a doubling of allegations of
research misconduct over the past decade, including an approximately
seven-fold increase for plagiarism and a notable rise recently in fabrication
allegations against graduate students and postdoctoral researchers. There
has been a dramatic increase in the number of cases requiring investigation
either by the affected institution or by OIG, and approximately 70 percent
of the recent findings by NSF have been in cases involving foreign collabo-
rations. These data are consistent with a study20 published last year that
found that one-third of NIH-supported researchers surveyed acknowledge
engaging in activities that are best described as questionable research
practices. The authors concluded that the “questionable practices . . . are
striking in their breadth and prevalence.” These practices can reasonably be
expected to occur in research supported by other federal agencies, and the
level of activity experienced in recent years by OIG indicates that NSF faces
similar issues. The prevalence of such practices suggests that integrity in
science is eroding. Since 1990, HHS has had programs designed to en-
courage responsible conduct of research, and NSF has implemented similar
instruction in selected programs. Since the early 1990’s both HHS and NSF
have had regulations for addressing allegations of research misconduct.
NSF plays a vital role in the education of future generations of research-
ers and engineers. In light of what appears to be a growing challenge to
the agency, NSF needs to implement a more comprehensive, agency-wide
program to instill ethics and integrity at all levels of the scientific, engineering
and education enterprise it supports.
Human Capital
Workforce planning. NSF reports that it has made progress in FY 2006 to-
ward implementing an effective workforce planning process based on sound,
objective criteria. The agency has drafted a three-year strategic workforce
plan, and each Directorate created its own staffing plan during this year’s
budget planning cycle according to a methodology developed by a commit-
tee of managers. In addition, the Division of Human Resources is reportedly
developing tools for prioritizing staffing needs and projecting turnover. Dur-
ing the past year the strain of NSF’s workload actually eased a bit as the
average number of proposals each program officer handled declined from
113 to 104, reflecting a slight increase in the number of program officers and
a modest decrease in the number of proposals received.
20
Martinson, B.C.; Anderson, M.S. and R. de Vries; Scientists
behaving badly; Nature:Vol. 435 pp. 737-738, 9 June 2005.
52
OIG Semiannual Report September 2006
Despite progress toward developing a comprehensive agency workforce
plan, the management of NSF’s growing workload continues to be one of
the agency’s most pressing challenges. The Advisory Committee for GPRA
expressed concern in its annual report about the workload that program
officers face and recommended that NSF examine ways to reduce unneces-
sary work.21 NSF’s growing workload was one of the primary reasons that
the agency launched the Business Analysis initiative four years ago to review
and reengineer NSF’s core business processes. But as the initiative nears
completion, OIG estimates that 75 percent of the improvement opportunities
identified by the contractor for the merit review and award management busi-
ness processes have not been acted on. Some of these proposals have the
potential to alleviate workload pressures by rationalizing NSF’s operations
and improving customer service. The immediate challenge for NSF manage-
ment is to determine which of these proposals have merit and are financially
feasible, and then to implement those that will ensure the most efficient de-
ployment of the workforce in the years ahead.
Another workforce planning issue is the extent to which NSF should use
rotators from the research community to fill key program management posi-
tions. NSF has a longstanding practice of recruiting scientists, engineers,
and educators from their home institutions or agencies to spend a few years
at the Foundation. In FY 2005, approximately half of NSF’s 400 program
officers were rotators. While acknowledging their contributions to keeping
NSF current on the latest research, we believe that their employment poses
several administrative and management challenges for NSF. Rotators who
serve at more senior levels lack institutional knowledge and are less likely to
make long-term planning a priority. In addition, rotators require more fre-
quent recruiting, hiring and training.
Two reports issued in the past year have highlighted the importance of hav-
ing permanent, experienced managers in senior positions. In its 2005 Re-
port on NSF’s Merit Review System, the National Science Board stated that
“at the higher management levels, including the division director, experienced
individuals need to oversee the complete system of the merit review process
and be able to recruit the best program officers.” The Advisory Committee
for GPRA commented that NSF “requires highly experienced program man-
agers with a broader understanding of the operation of the Foundation and
the evolution that it is undergoing. If NSF seeks to undertake activities such
as identifying a portfolio of “transformative” research, the expertise of experi-
enced program managers will play a critical role.”23 We believe that a sig-
nificant challenge for NSF is to ensure a stable and experienced managerial
corps. To attain that goal, it needs to give careful consideration to whether
the agency would be better served by reserving specific management posi-
tions for permanent professional staff.
21
Report of the Advisory Committee for GPRA Performance Assessment FY 2006, p. 57
23
Report of the Advisory Committee for GPRA Performance Assessment FY 2006, p.49, 52
53
Appendicies
Administrative infrastructure. Issues related to administrative infrastruc-
ture and support continue to limit the size and effectiveness of NSF’s work-
force. Inadequate office space, tight travel funds, and flawed systems to
support traveling and hiring actions place serious constraints on the staff’s
ability to perform its work. Office space limitations remain the most critical
issue, impeding the recruitment of staff, the ability to obtain space for panels
and meetings, and the capacity to store sensitive documents. In developing
their departmental staffing plans this past year, NSF directorates informed
the agency that insufficient office space restricted the number of people they
could hire.
Travel funds are also inadequate for the purpose of properly overseeing
existing awards. In addition, staff members have been hampered in making
travel arrangements by recurring problems with FedTraveler, NSF’s on-line
system for booking and reimbursing official travel. The agency continues
to work with the contractor responsible for the system on correcting them.
In the past year, NSF has taken several actions aimed at improving perfor-
mance in the area of human resource management so that hiring actions will
be processed more quickly, but progress has been uneven. NSF needs to
make allocating more funding for administrative resources a priority in order
to maximize the effectiveness of staff.
Budget, Cost and Performance Integration
Performance reporting. The purpose of the Government Performance and
Results Act is to improve the efficiency and effectiveness of federal pro-
grams by establishing a system to set goals for program performance and
to measure results. However, the results of funding basic scientific research
are difficult to measure in the short term, as the value of many research
projects only becomes apparent over time. To assist in this endeavor, NSF
convenes an Advisory Committee on GPRA (AC/GPRA) each year to as-
sess progress in achieving its strategic goals. Last year’s AC/GPRA as-
sessment suggested that NSF could better demonstrate the relevance of its
accomplishments to its outcome goals. This year’s Committee was more
specific, recommending that NSF’s “nuggets” (selected success stories) in-
clude the specific activities and outcomes that are desired, and include more
“measures of effectiveness.” Among other things it also recommended that
NSF develop baselines to better demonstrate how the agency’s efforts are
contributing to positive change.
Communicating the results of scientific research is also key to furthering
science and demonstrating the effects of federal funding. The Office of Sci-
ence and Technology Policy recently affirmed that the administration regards
the timely, complete and accurate communication of scientific information as
Audit of Project Reporting for NSF Awards, December 2004, OIG 05-2-006
24
54
OIG Semiannual Report September 2006
an important aspect of public service. In the past two years, OIG has is-
sued three reports that underscore the need to improve NSF’s reporting of
research results. In 2005, auditors found that approximately 47 percent of
final and annual reports required by their NSF awards over a five-year pe-
riod were submitted late or not at all. Moreover, 8 percent of the 43,000 final
project reports were never submitted.24 NSF agreed with the report’s recom-
mendations to strengthen project reporting and is in the process of develop-
ing a new project-reporting notification and tracking system.
Two related reports on disseminating the results of NSF-funded research to
the public were issued during this past year. In February, OIG recommended
that the agency make publication citations for each research project that it
funds available on its website.25 The agency agreed and is planning to make
the citations available by July 2007. In September, a follow-on report as-
sessed interest among NSF’s stakeholders and managers in making even
more information about research outcomes available to the public.26 The
auditors found that there was overwhelming interest in providing brief sum-
maries of the results of each project NSF funds on the agency website.
Significant support was also registered for posting conference proceedings,
abstracts, and final project reports. NSF agreed that increased public ac-
cess to the results of its research was desirable, and is working with other
government agencies toward developing a standardized reporting template.
The significant challenge for NSF is twofold: to develop a credible process
for evaluating the impact of its overall effort, rather than relying on selected
nuggets to suggest the success of its investments, and to ensure that the re-
search community and the public have ready access to the scientific results.
Cost information. NSF does not maintain basic information about the cost
of its operations that would enable managers and those responsible for its
oversight to better assess the agency’s past performance and make more
informed decisions about its future. In recent years, NSF has enhanced its
cost accounting system so it can track costs according to its strategic goals,
as well as the ten investment categories that are subject to OMB evaluation.
While the current system provides aggregated costs that are useful to as-
sessing strategy, it does not track the costs of NSF’s internal business pro-
cesses and activities such as soliciting grants, conducting merit reviews, or
performing post-award grant administration. Information about the cost-ef-
fectiveness and efficiency of an organization’s workforce and work process-
es is critical to any effort to carry out such initiatives as business-process im-
provements or activity-based costing. We believe that management should
consider the use of more detailed cost information as a tool for improving its
business processes and maximizing limited resources.
25
NSF’s Policies on Public Access to the Results of NSF-Funded Research, February 2006, OIG 06-2-004
26
Interest in NSF Providing More Research Results, September 2006, OIG 06-2-013
55
Appendicies
Information Technology
Enterprise Architecture. Enterprise architecture involves planning for orga-
nizational change using detailed models that demonstrate, in both business
and technical terms, how an entity intends to transition from its current op-
erations to a more optimal system in the future. It is widely accepted that a
carefully designed enterprise architecture is vital to an organization’s efforts
to modernize and improve its IT environment. The Government Accountabil-
ity Office (GAO) recently issued a report on the progress made by 27 federal
departments and agencies toward establishing enterprise architecture pro-
grams. They found that NSF lags behind all but four of the agencies studied,
satisfying just 52 percent of GAO’s core elements for effective enterprise
architecture management.27 GAO recommended that NSF, as well as other
federal agencies, implement a plan for fully satisfying each core element
to ensure that there is a mature enterprise architecture program in place to
guide future IT development.
United States Antarctic Program
USAP long-term planning. The United States Antarctic Program, which is
managed by NSF, is responsible for the coordination and support of Amer-
ica’s scientific research program in Antarctica. The USAP operates three
scientific stations and provides researchers with logistical, operational, and
laboratory support. Some 3500 researchers and support personnel annu-
ally participate in the USAP, which cost $295 million in FY 2006. Providing
for the safety and well-being of so many in such an isolated, high-risk, and
extreme environment has been a long-term management challenge for NSF.
A 2003 OIG audit report cited examples of aging USAP infrastructure and
recommended that NSF provide a separate line item in its budget for the
replenishment of its buildings and facilities according to a capital asset man-
agement plan, to ensure that the useful lives of buildings and equipment
would not be stretched beyond the point where they become unsafe.28 NSF
responded that its current practices were adequate and that a dedicated
fund would restrict needed financial flexibility. Two additional issues with
long-term planning were raised last year by a Committee of Visitors report
that recommended that the agency: 1) develop a long-term planning process
to anticipate future research needs and the attendant logistical challenges
before they reach the proposal stage; and 2) improve its projections of the
actual costs of doing field and lab science to assure adequate planning. This
past year NSF asked outside experts to analyze the USAP’s expected logis-
tics and infrastructure needs.
27
Leadership Remains Key to Establishing and Leveraging Architectures for Organizational Trans-
formation, GAO-06-831, August 2006, p. 21
28
Audit of Occupational Health & Safety and Medical Programs in the United States Antarctic
Program, OIG 03-2-003, March 2003
56
OIG Semiannual Report September 2006
Information technology systems also play an essential life-support role in
such a fragile environment. The evaluation report our office is required to
prepare under the Federal Information Security Management Act (FISMA),
noted that NSF needed to make improvements in the USAP operating plat-
form and in disaster recovery.29 The auditors believe that these weaknesses
have the potential to adversely affect the well-being of the personnel, as well
as the conduct of science, in Antarctica.30 The risks inherent in the USAP
program create a significant ongoing challenge for NSF.
Merit Review
Broadening Participation. Increasing the participation of women and
minorities in the merit review process by adding more applicants, awardees,
and reviewers from underrepresented groups is an important priority of NSF.
Developing the unrealized potential of underrepresented groups will benefit
the U.S. through expanded individual opportunities and enhanced national
prosperity. However, in FY 2005, NSF overall received fewer proposals and
made fewer awards than the previous year, and women and minorities were
proportionately represented in that trend, although the rate of decline for the
underrepresented groups was slightly less than that of the general popula-
tion. The success rate (the percentage of proposals that NSF decides to
fund) for both women and minorities remained the same as in FY 2004.
In the past NSF has had difficulty measuring the participation of underrepre-
sented groups as reviewers, but has gradually increased the percentage of
reviewers who report demographic information from 9 percent in 2002 to 22
percent in 2005. Among reviewers who voluntarily provided demographic
information, 35 percent indicated that they were members of an underrepre-
sented group, the same as last year. During the past year, the National Sci-
ence Board issued a report on the Merit Review System that recommended
that the agency seek to improve the information on traditionally underrepre-
sented groups in the reviewer’s database.31 The Board’s recommendation
was affirmed by NSF’s Advisory Committee for GPRA Performance Assess-
ment, which suggested that NSF consider methods other than self declara-
tion to collect more demographic data. The Committee also urged NSF to
provide more conclusive evidence on whether it has indeed increased op-
portunities for underrepresented individuals and institutions. Because diver-
sity is widely viewed as allowing for more creative ideas and better-informed
decisions, resulting in more innovative research, the effort to broaden partici-
29
NSF Federal Information Security Management Act, 2006 Independent Evaluation Report
30
Ibid p. 1
31
Report of the National Science Board on the National Science Foundation’s Merit Review System,
NSB-05-119, p. 15
57
Appendicies
Appendix 2
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 recommendations 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. 5, 13, 41)
Matters referred to prosecutors, and the resulting prosecutions and convic-
tions. (See pp. 31, 47)
Revisions to significant management decisions on previously reported rec-
ommendations, and significant recommendations for which NSF has not
completed its response. (See pp. 24,46)
Legislation and regulations that may affect the efficiency or integrity of NSF’s
programs. (See p. 7)
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)
58
OIG Semiannual Report September 2006
Appendix 3
ACRONYMS
CASB Cost Accounting Standards Board
CFO Chief Financial Officer
COI Conflict of Interest
COV Committee of Visitors
DACS Division of Acquisition and Cost Support
DCAA Defense Contract Audit Agency
DD Deputy Director
DFE Designated Federal Entity
DGA Division of Grants and Agreements
DIAS Division of Institution and Award Support
DoD Department of Defense
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
GAO Government Accountability Office
GPRA Government Performance and Results Act
HHS Department of Health and Human Services
IG Inspector General
MIRWG Misconduct in Research Working Group
MREFC Major Research Equipment and Facilities Construction
NASA National Aeronautics and Space Administration
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
59
Appendicies
SBIR Small Business Innovation Research
STC Science and Technology Centers
USAP United States Antarctic Program
USDA U.S. Department of Agriculture
USAID Agency for International Development
USI Urban Systemic Initiative
USP Urban Systemic Program
60
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Semiannual Report - September 2006
Published by the National Science Foundation, Office of Inspector General on 2006-09-01.
Below is a raw (and likely hideous) rendition of the original report. (PDF)