Title : Number 10--NSF OIG Semiannual Report to the Congress Type : Report NSF Org: OIG Date : August 29, 1995 File : oig10 OFFICE OF INSPECTOR GENERAL Semiannual Report to the Congress Number 10 October 1, 1993 - March 31, 1994 NATIONAL SCIENCE FOUNDATION LETTER TO THE NATIONAL SCIENCE BOARD AND THE CONGRESS This report describes our activities and accomplishments for the first half of FY 1994. Section 5 of the Inspector General Act of 1978, as amended, requires that the National Science Board transmit this report to the Congress within 30 days of its receipt along with any comments the Board may wish to make. This reporting period marks the end of the first year of our inspections program. We have now completed inspections at five institutions and are beginning to develop common findings in the areas of financial management, administration, and achievement of programmatic goals. Integration of this program into the office's existing audit, investigation, and oversight capabilities represents a significant initiative in response to the Vice President's National Performance Review recommendations for Inspectors General govermentwide. We note with sadness the death of Dr. Jerome H. Fregeau, the first Director of OIG's predecessor organization and, for a time, Acting Inspector General. Dr. Fregeau began a tradition of oversight of the Foundation's programs that emphasized integrity and an appreciation of the importance of the partnership between the Foundation and its funded research organizations. These values provided the foundation for OIG's approach to oversight of the agency's programs. Dr. Roland Schmitt, Chairman of the National Science Board's Committee on Audit and Oversight, has completed the second of two terms and so he will be leaving the Board. Dr. Schmitt supervised OIG during some of the years most crucial to its development. We will miss his insight and strong support. We look forward to continuing to work with the Board and the Foundation's Director to meet the expanding challenges of this decade. Linda G. Sundro Inspector General April 30, 1994 EXECUTIVE SUMMARY FINANCIAL AUDITS The General Accounting Office recently recommended that OIGs provide information about their strategic plans in their Semiannual Reports. In July 1992, we developed a strategic plan to assist us in using our limited audit resources more effectively. As part of the plan, we increased our external audits of centers and of science and engineering education programs. NSF estimates that centers receive approximately $200 million a year. At seven centers, we identified significant compliance and internal control issues and questioned claimed costs. We audited 36 organizations that were receiving educational support, questioned about $1 million in claimed costs, and identified important financial management and internal control issues. We also conducted several reviews of internal NSF operations and identified $1,363,000 in funds that could be used more efficiently. INVESTIGATIONS We made substantial progress on an investigation of a company that received awards under the Small Business Innovation Research program by submitting fraudulent information and forged documents. As a result of our investigation, the U.S. Attorney filed a civil complaint seeking $4.2 million in damages, and the U.S. District Court ordered the freezing of the personal and business assets of the owner of the Small Business Innovation Research company. Consistent with recommendations in the Vice President's National Performance Review, we also analyzed systemic issues that arose as a result of our on-going investigations. We made several recommendations to improve NSF's administration of the Small Business Innovation Research program by reducing vulnerability to fraud. We also recovered $414,856. MISCONDUCT IN SCIENCE We present a discussion of misconduct allegations that result from failed collaborative relationships. These cases usually concern rights to intellectual property used during collaborations. In our review of such cases, we have made three important observations. OIG lawyers and scientists authored an article in "The Journal of Higher Education" that describes NSF's method for investigating misconduct in science. INSPECTIONS AND EVALUATIONS We have recently completed the first year of our inspections program. So far, we have inspected five institutions. In this report, we discuss our overall findings on the institutions' compliance and effectiveness in the areas of finance, administration, and achievement of program goals. PERFORMANCE MEASURE To complement statistics required by the Inspector General Act, we developed a new performance measure that tracks OIG recommendations that are designed to improve the economy and efficiency of internal NSF operations. This new performance measure demonstrates that NSF management has consistently agreed to resolve our systemic recommendations in a reasonable manner. TABLE OF CONTENTS Audit Investigations Oversight Legal Significant Audit Recommendations from Previous Semiannual Reports Reports With Outstanding Management Decisions Agency Refusal to Provide Information of Assistance Significant Management Decisions That Were Revised Inspector General's Disagreement With Significant Management Decisions List of Reports Statistical Table of Inspector General Issued Reports With Questioned Costs Inspector General Reports With Recommendations That Funds Be Put To Better Use Additional Performance Measure ACRONYMS CAAS Contracted Advisory and Assistance Services CFO Chief Financial Officer CPA Certified Public Accountant CPO Division of Contracts, Policy, and Oversight DAEO Designated Agency Ethics Official DAS Division of Administrative Services DGA Division of Grants and Agreements DoD Department of Defense ECIE Executive Committee on Integrity and Efficiency ERC Engineering Research Center ETAS Electronic Time and Attendance System ETS Electronic Timecard System FDCPA Federal Debt Collection and Procedures Act FMFIA Federal Managers' Financial Integrity Act FPDS Federal Procurement Data System GSA General Services Administration HHS Department of Health and Human Services INT Division of International Programs IRM Information and Resource Management NASA National Aeronautics and Space Administration NATO North Atlantic Treaty Organization NSB National Science Board NZ New Zealand ODP Ocean Drilling Program OGC Office of General Counsel OGE Office of Government Ethics OMB Office of Management and Budget PCIE President's Council on Integrity and Efficiency PI Principal Investigator SBIR Small Business Innovation Research SBIR-II SBIR Phase II Grant General Conditions STC Science and Technology Center REPORTING REQUIREMENTS The table cross-references the reporting requirements prescribed by the Inspector General Act of 1978, as amended, to the specific pages in the report where they are addressed. Section 4(a)(2) Review of Legislation and Regulations Section 5(a)(1) Significant Problems, Abuses, and Deficiencies Section 5(a)(2) Recommendations With Respect to Significant Problems, Abuses, and Deficiencies Section 5(a)(3) Prior Significant Recommendations on Which Corrective Action Has Not Been Completed Section 5(a)(4) Matters Referred to Prosecutive Authorities Section 5(a)(5) Summary of Instances Where Information Was Refused Section 5(a)(6) List of Audit Reports Section 5(a)(7) Summary of Each Particularly Significant Report Section 5(a)(8) Statistical Table Showing Number of Reports and Dollar Value of Questioned Costs Section 5(a)(9) Statistical Table Showing Number of Reports and Dollar Value of Recommendations That Funds Be Put To Better Use Section 5(a)(10) Summary of Each Audit Issued Before This Reporting Period for Which No Management Decision Was Made by the End of the Reporting Period Section 5(a)(11) Significant Revised Management Decisions Section 5(a)(12) Significant Management Decisions With Which the Inspector General Disagrees AUDIT The Office of Audit is responsible for auditing grants, contracts, and cooperative agreements funded by NSF's programs and operations and for ensuring that financial, administrative, and programmatic aspects of those activities are reviewed. The Office evaluates internal controls, reviews data processing systems, and follows up on the implementation of recommendations included in audit reports. In addition, the Office assists in the financial, internal control, and compliance portions of OIG inspections. All audit reports are referred to NSF management for action or information. The Office of Audit advises and assists NSF in resolving audit recommendations. The Office also acts as a liaison between NSF and audit groups from the private sector and other federal agencies by arranging for special reviews, obtaining information, and providing technical advice. The Office of Audit provides speakers and staff assistance at seminars and courses sponsored by NSF and other federal agencies and at related professional and scientific meetings. STRATEGIC PLAN FOR AUDITS The General Accounting Office recently recommended that OIGs include in their semiannual reports information about the implementation of, and changes to, their strategic plans. In July 1992, we developed a strategic plan to assist us in using our limited audit resources more effectively (see Semiannual Report No. 7, page 2). We have devoted most of our audit resources to reviewing those organizations that receive NSF awards. We use more audit resources for external awards (as compared with reviews of NSF's internal financial operations) because most of NSF's funds are used to support science and engineering research and education. Less than 5 percent of the agency's appropriated funds are used to administer NSF's grants, cooperative agreements, and contracts. ***************************************************************** GRANTS, CONTRACTS, AND COOPERATIVE AGREEMENTS The type of funding instrument used by the government in a particular situation--grant, cooperative agreement, or contract-- depends on the government's objective and expected level of involvement. When a government agency wants property or services for itself, it uses a contract to obtain them. When the government awards an organization funds to do something for the public's benefit and the agency expects to be substantially involved in the recipient's performance, it uses a cooperative agreement. When the government awards an organization funds to do something for the public's benefit and the agency does not expect to be substantially involved in the recipient's performance, it provides that funding with a grant. ***************************************************************** Most of our external audits are conducted at institutions where we have overall audit responsibility. Most organizations that receive NSF funds are audited by the agency that has been assigned audit responsibility or "cognizance," by the Office of Management and Budget (OMB). Consistent with recommendations from the Senate Committee on Governmental Affairs, we do conduct selected audits of NSF awards at universities where another agency has responsibility for audits of universitywide systems. We select individual NSF awards for audit based on requests from NSF management, risks that we have identified, and the goals described in our strategic plan. We also conduct inspections of NSF awards at universities. The financial review component of an inspection is more limited in scope than audits. However, auditors are responsible for the financial, internal control, and compliance components of an inspection. Our inspections program is described on page 33. Our strategic plan calls for us to increase external audits of awards in NSF's science and engineering education programs, centers, and the Antarctic program. SCIENCE AND ENGINEERING EDUCATION NSF's funding for science and engineering education has increased from $171 million in FY 1989 to $570 million in FY 1994. Funding for these programs has increased rapidly, and many grantees that receive support are unfamiliar with the regulations that apply to federal grant funds. As a result, we are concerned that grantees that receive funds under NSF's science and engineering education programs are at greater risk of mismanaging those funds than many large educational or research institutions that have sophisticated financial systems and established track records working under federal grant awards. Our initial findings indicate that these concerns have some justification. Many of the activities NSF funds focus on ways of increasing interest in, and improving the understanding by students and the general public of, science, engineering, and mathematics. OIG staff and certified public accountants (CPAs) under contract with OIG sampled a cross section of education programs. These programs supported the production of educational films, teacher training, curricula and instructional material development, the reform of state education systems, and educational activities provided to the public by museums. We identified 29 organizations that received NSF education awards for the first time. Audits of 26 of these organizations are scheduled to be completed in the next reporting period. Over the last 6 months, we audited three first-time recipients that had never had their NSF awards reviewed. We also conducted 33 audits of organizations that received awards in support of science and engineering education. These reviews were suggested by NSF management or emerged as a result of audits conducted under OMB Circular A-133 or our ongoing reviews of NSF's education activities. Audits of the 36 organizations that received educational support resulted in about $1 million in questioned costs. We also identified important financial management and internal control issues common to many of these first-time grantees. Many of the procedural deficiencies and questioned costs resulted from claimed costs that were greater than actual expenditures; claimed costs that had no connection with the award; expenditures that did not have supporting documentation; indirect costs that were improperly accounted for and allocated; and consultants, subrecipients, and subcontractors that were not adequately supervised by the grantee. We remain concerned about new grantees who receive education and human resource awards. We will continue to address these concerns, as well as issues identified by management, through audits and increased oversight of these awards. Summaries of significant audits that we conducted in the area of education follow. Costs Questioned in Connection With a Science and Math Award NSF awarded three grants totaling $1,123,562 to a nonprofit association physically located at a national research laboratory. The association used the national research laboratory's facilities, research personnel, and equipment to develop ways of enhancing precollege science and mathematics education. The association claimed $1,100,979, and we questioned $61,391 of direct costs claimed under the grants and $323,944 of indirect costs claimed in the association's indirect cost pools. We questioned the direct costs because the grantee incorrectly charged material and supply costs to the NSF award instead of a Department of Energy award, did not adequately support the consultant's rate of pay with written agreements and invoices, and used participant support funds for other types of costs without NSF's prior approval. We recommended that the grantee produce documentation to support the questioned costs or refund the money to NSF. We questioned the indirect costs because the association charged costs to the awards in an amount that exceeded allowed rates. In addition, the association had not adopted the laboratory's indirect cost rate. Instead, the association devised its own indirect cost rate, which was based on an estimate of costs incurred by the national research laboratory on its behalf. However, the association did not actually reimburse the national research laboratory for these indirect costs. We recommended that NSF disallow all of these indirect costs. We also noted the following compliance and internal control issues: cash balances exceeded operating needs, documentation was not maintained to support competitive analyses that were undertaken for procurement actions, indirect costs were billed before the costs were incurred, journal entries were not prepared to support the reallocation of costs from one general ledger account to other general ledger accounts, and bank reconciliation responsibilities were not separated from cash disbursement and cash receipt responsibilities. The grantee generally agreed with our compliance and internal control findings and recommendations. NSF Requests an Audit of a Study of Youths' Knowledge of Science NSF awarded a $1,030,584, follow-on grant to a state university to help the university continue its study of public school youths' attitudes and knowledge about science and technology. NSF's Division of Grants and Agreements (DGA) asked that we review $802,245 of preaward costs for the follow-on grant because the university believed that the costs were unfunded expenditures under the original NSF grant. The university asserted that the NSF program officer for the original grant encouraged the university to incur the expenses even though the NSF grants officer did not authorize them. NSF awarded the follow-on grant, but it withheld $302,245 of preaward costs until we completed our review. We recommended that NSF release $177,245 of the $302,245 held. We questioned $125,000 because supporting activity reports for faculty salary costs were either incomplete or not on file; consulting costs were not supported by consultants' hours or tasks; and foreign travel costs were not budgeted for, or approved by, NSF. Further, we found that the university had not required advance written authorization for travel or entered into contractual agreements for all consultant services. NSF ultimately determined that the NSF program officer had improperly encouraged the grantee to incur expenses without authorization from the grants officer. We made recommendations to address these findings and questioned costs. Review of Grant for the Development of Elementary Curriculum NSF awarded a $2,208,868 grant to a nonprofit organization to support the development of a hands-on, elementary curriculum in science. In response to a request from DGA, we conducted a review to determine whether the grantee had implemented recommendations and properly resolved questioned costs identified by CPAs in a prior audit report. We also audited costs incurred since the prior audit report. Our review disclosed that the organization has continued to incur questionable costs, and numerous compliance and internal control problems persist. We questioned $35,813 because the nonprofit organization used NSF funds to reimburse NSF for costs questioned in a prior audit; timesheets did not support claimed costs; refunds were not applied to the grant; consultant fees exceeded amounts in the consultant agreement; costs were charged after the award expired; claimed costs were not supported by adequate source documentation; and claimed costs exceeded recorded costs. We also found that an A-133 audit had not been conducted, as required by federal guidelines; purchase orders were not used to acquire goods and services; responsibilities for handling cash transactions were not adequately separated; unallowable costs were not identified and segregated in the accounting system; and NSF was not notified that a principal investigator (PI) who worked on the grant resigned from his employment with the organization. We recommended, and the organization agreed to, provide documentation to support the questioned costs or refund NSF the $35,813 in questioned costs, comply with federal regulations, and strengthen its internal control policies and procedures. ****************************************************************** QUESTIONED COST A cost resulting from an alleged violation of law, regulation, or the terms and conditions of the grant, cooperative agreement, or other document governing the expenditure of funds. A cost can also be "questioned" because it is not supported by adequate documentation or because funds have been used for a purpose that appears to be unnecessary or unreasonable. ***************************************************************** Audits of Education Grants at Museums Find Weaknesses A portion of NSF's science and engineering education funds support informal education by generating interest and understanding of science through museum exhibits, and community outreach programs. They also under-write significant costs associated with storage of the museum's exhibits. Audits of education programs at museums are often conducted by OIG staff or CPAs under contract with NSF because NSF is usually the cognizant organization. OMB Circular A-133 requires that nonprofit organizations be audited by an independent organization and that the results of those audits be submitted to the agency that has oversight responsibility for the organization. In this reporting period, we reviewed audit reports from five museums that had OMB Circular A-133 single audits performed and reports issued by the museum's independent accountants. The audits resulted in either questioned costs or noncompliance findings and internal control weaknesses. Below are summaries of three of these reports. NSF granted a New York museum 33 awards to support various projects in science education. The museum claimed $2,243,059, and the independent accountants questioned $111,413 because documents supporting claims for salaries, equipment purchases, and consultant services were inadequate; consultant service expenses exceeded allowable rates; and salary expenses were not properly authorized. The museum did not provide proper notice that it had subcontracted for construction services and did not pay the required minimum wage under the subcontract. NSF awarded a Washington State museum four awards to support scientific exhibits and a science carnival. The museum claimed $522,357, and the accountants questioned $22,950 because the museum claimed costs that exceeded actual expenditures; claimed salary costs that were based on rates or time and effort reports that were not properly approved or certified; and improperly charged supplies, computer hardware, and advertising costs to grant awards. Also, the museum did not prepare financial reports in a timely manner. We made recommendations to correct these deficiencies, but, because they were made at the end of this reporting period, they have not yet been resolved. NSF awarded a California museum 10 awards for activities on such topics as teacher institutes, cooperative research with Brazil, exhibit design, perception of sound, and Acquired Immune Deficiency Syndrome and the immune system. Accountants found that the museum did not keep property records on all equipment purchases, deposit cash advances in interest-bearing accounts and return the earned interest to the sponsoring federal agency, and limit cash requests to its immediate disbursement needs. The accountants made recommendations to correct these findings. The recommendations should be resolved during the next reporting period. We also developed findings concerning the following education awards. NSF awarded two grants totaling $1,971,525 to a state department of education. The grants provided funds to create videos that would present problemsolving techniques for elementary school teachers, school administrators, and parents and develop statewide examinations and teaching materials. The grantee claimed $529,723 in costs, and we questioned $71,612 because the grantee did not adhere to the indirect cost rate approved in the award, use the correct fringe-benefit rate for claiming costs, or maintain records to account for the grantee's cost participation. The grantee concurred with the questioned costs and agreed to adjust the claimed costs. NSF awarded a $1.5-million grant to a private, nonprofit corporation to make and distribute a film that shows the relationship between mankind and the natural world. The grantee claimed $281,019, and we questioned $112,324. We found the following deficiencies and made recommendations to correct them: costs were claimed that were not actually incurred, overhead and fees were not approved, documentation to support costs claimed was insufficient, and travel costs were claimed that were not allowed by federal cost principles. The report was issued near the end of the reporting period; therefore, the questioned costs, findings, and recommendations are not yet resolved. NSF expects to resolve the outstanding findings and recommendations during the next reporting period. NSF awarded $4,251,500 of an estimated $10-million cooperative agreement to a private, nonprofit corporation. The 5-year cooperative agreement provides funding for planning, operating, and managing a project aimed at assisting young people in living and working in a changing scientific and technological society. The corporation claimed $1,802,685, and we questioned $45,010 because we found, and made recommendations to correct, the following deficiencies claimed subcontract costs exceeded actual expenses, claimed costs were not related to the NSF award, interest income was claimed as award expenses, refunds and credits were not deducted from claimed costs, financial reports submitted to NSF were not properly prepared, and cash requests exceeded award disbursement needs. At the end of the reporting period, NSF and the grantees were discussing the questioned costs, findings, and recommendations. We expect that these concerns will be resolved during the next reporting period. CENTERS President Clinton's FY 1995 budget submission to Congress stated: "NSF support for centers is based on the premise that some scientific questions and research problems can best be addressed through the multidisciplinary, long-term coordinated efforts of many researchers on the many facets of a complex problem." NSF expends a significant portion of its funds on this innovative program. NSF estimates that centers receive approximately $200 million a year, which is divided among a variety of centers, including Science and Technology Centers (STC), Engineering Research Centers (ERC), Long Term Ecological Research Sites, Materials Research Centers, and Minority Research Centers of Excellence. We are concerned that centers can pose greater management risks than individual investigator research awards because centers are often organized separately from university departments; centers receive large awards from NSF, often from $1 million to $3 million annually; and cost sharing between industry or state and local governments and institutional commitments are stressed in all center programs. We conducted audits at four STCs and three ERCs. We also conducted an inspection at an ERC. We are using the results of these reviews to help identify common risk factors. Based on selection criteria that we are developing from this analysis, we will identify the centers that we will audit over the next several years. Our reviews of NSF centers began at the ERCs and STCs. NSF established the ERC program in 1985 to address fundamental research issues that are crucial to the next generation of engineering systems and to educate engineering students using a cross-disciplinary, team approach to problemsolving. NSF established the STC program in 1987 to support innovative interdisciplinary research and education and to support the transfer of knowledge in basic science and mathematics. ERCs and STCs are located primarily on college and university campuses nationwide. In FY 1993, NSF provided 18 ERCs and 25 STCs approximately $100 million. In FY 1994, NSF will provide these centers a projected $110 million. NSF provides funding for the ERCs and STCs through cooperative agreements made with academic institutions. The institution provides the rest of the funding and is responsible for managing the center's operations. Under these cooperative agreements, NSF offers academic institutions an initial, 5-year funding commitment with funding available for an additional 6 years (for a maximum of 11 years). Audit of Engineering Center at NSF's Request We audited one ERC at NSF management's request. In 1987, NSF and a western university established an ERC to develop high-performance computing systems. The ERC's FY 1994 budget is about $7 million, including $1.9 million provided by NSF. NSF's Division of Engineering Education and Centers requested that we review the ERC's financial systems because the ERC had incurred a $1,536,829 operating deficit from FYs 1990 through 1992. We conducted this review to determine whether the ERC's financial management system provided accurate, current, and complete financial results of grant activities; the causes of the operating deficits; and the manner in which the operating deficits should be liquidated. We found the ERC had a financial management system that could provide accurate, current, and complete disclosure of the financial activities under the awards. The system provided for a comparison of budgeted versus actual grant expenditures and the source and application of funding. Nonetheless, the center had incurred an operating deficit largely because it did not adhere to budgets for the various programs, financial reports did not include all ERC funds program managers were assigned responsibility for program and fiscal controls and the ERC operated without an accountant for a long time. The center has repaid $680,920 of the deficit and has formulated a schedule for repaying the $855,909-balance over 4 years. The center has hired an accountant and required that reports prepared for the dean's office include all accounts. The university also drafted policies and procedures that prohibit university officials from charging additional costs to accounts that have deficit balances. This control should ensure that center officials will not be able to incur additional deficits or increase deficit balances. During our review of the center's deficit management process, we found additional deficiencies that the center needs to address. Although these findings were not as serious as those that prompted our visit, we recommended that the university identify cost sharing in its accounting records; request audits of subgrantees and take corrective action when necessary; and make available manuals, guides, and training to staff members who conduct grant-related functions. The center generally concurred with our findings and recommendations. Audits at Six Centers Identify Common Issues We conducted audits at two other ERCs and four STCs to ensure that they were conducting the activities defined by their cooperative agreements. We audited about $47.9 million in costs claimed under NSF cooperative agreements. We identified the following common issues: claimed cost sharing was not supported by adequate documentation; costs claimed on Federal Cash Transactions Reports exceeded actual costs; centers were not always complying with NSF award documents and other federal requirements; indirect costs were incorrectly charged on equipment and participant support costs; salary and tuition costs were not supported by personnel activity reports; adequate support was not provided for consulting services, participant support, and other direct costs; and centers had not always established adequate internal controls. Recommendations associated with our audits of these ERCs and STCs will be finalized in the next reporting period. We will continue our reviews at all centers to determine whether promised cost sharing is being met, a system exists to account for and monitor cost sharing, and claimed cost sharing is supported by adequate documentation. ANTARCTIC PROGRAM In FY 1994, NSF will expend $195.5 million in support of the U.S. Antarctic program ($132.9 million for research and logistic support and $62.6 million for safety, environmental, and health initiatives; ice breaking; airplane crews; and support provided by the Navy). NSF supports research in Antarctica and has overall management responsibility for U.S. operations conducted there, including ensuring compliance with the Antarctic Conservation Act. Because this area of the world is so remote, it is difficult to conduct routine audits to ensure that program objectives are met. This lack of routine audit coverage increases the risk of financial loss and mismanagement. Our strategic plan calls for an increase in the number of reviews of the Antarctic program. During this reporting period, we audited one aspect of this program. Although NSF is responsible for the program's overall management, it maintains contracts with several companies to help implement the program and provide support activities. One of these contracts is with the New Zealand airline that maintains the seven aircraft that provide inter- and intra-continental transportation of supplies, equipment, and personnel in Antarctica. NSF owns seven LC-130 aircraft to transport personnel and supplies for activities conducted in Antarctica during the operational season (October through February). These aircraft are stationed in Christchurch, New Zealand, and provide an air link between McMurdo Station and research points throughout Antarctica. The aircraft are owned by the U.S. government, flown by Navy pilots, and maintained by mechanics employed by a New Zealand airline. We reviewed the rate the airline proposed to charge for the mechanics for their maintenance services. The results of that review follow. Review of Airline's Proposed Rate for Work on NSF's LC-130 Aircraft In response to a request from NSF's Office of Contract, Policy, and Oversight (CPO), we tested the airline's accounting records and other supporting documentation to determine the reasonableness of the airline's proposed labor rate for maintaining the aircraft. The airline proposed to use these costs in a new, 3-year contract beginning December 1, 1993. A previous maintenance contract between NSF and the airline included a fixed-price, hourly rate that was comprised of labor costs, indirect costs, and profit. Under that contract, NSF paid for approximately 75,000 labor hours. The airline proposed an hourly rate of $72 New Zealand (NZ) dollars for labor and indirect costs. We questioned $12 NZ of the $72-NZ rate because indirect costs and adjustments did not comply with the Federal Acquisition Regulation and were not allocable to NSF's aircraft maintenance. We recommended that the contracting officer include a $60-NZ hourly rate in the new contract. If the contracting officer implements this recommendation, NSF will save over $950,000 NZ ($522,000 U.S. dollars) during the first year of the 3-year contract. The recommended rate was the result of our eliminating proposed costs from the indirect cost pool and rejecting other adjustments to the airline's proposed hourly rate. We project that this will result in a $2,610,000 savings over the 5-year life of the contract. While we were conducting our review, we attended contract negotiations to provide the contracting officer with financial advice on the airline's proposed costs. As a result, the contracting officer had access to immediate, on-site advice about the airline's counterproposals during contract negotiations. The airline ended the on-site discussions without an agreement, but negotiations are continuing. OTHER AUDITS OF NSF AWARDS In addition to the external audit activities emphasized in our strategic plan, we audited other NSF contracts and grants. Below are discussions of those external audits. Travel Services Provider Fails to Follow Contract Requirements NSF has a contract with a private corporation to arrange domestic travel for NSF employees. NSF's Division of International Programs (INT) uses a different contractor to arrange for international travel of U.S. and foreign scientists. The contractor that provides international travel services was awarded a 4-year, $5.8-million contract to arrange travel, issue tickets for transportation, provide advances for per diem expenses, obtain visas, and process reimbursement vouchers for U.S. scientists traveling abroad and foreign scientists traveling to the United States. The contractor claimed $1,559,147, and we questioned $48,787. The questioned costs resulted primarily from funds that were expended on unauthorized or unallowable items, excess funds that were not returned by travelers, travelers' refunded amounts that were not returned to the NSF account, and claimed travel costs that were not supported by source documentation. We also found that the corporation did not comply with critical contract provisions. For example, the corporation accepted travel vouchers as presented by travelers without proper review of costs; a key contract person was replaced without NSF's written approval; and separate insured bank accounts were not established for NSF funds. We recommended that the contractor comply with these contract provisions. The contractor generally agreed with our findings and recommendations. During our audit of the contract, we found problems related to INT's authorization of costs and the way INT administered the contract. We questioned $4,014 in costs authorized by NSF staff. INT authorized the contractor to provide funds for travelers' entertainment expenses and meal allowances at local meetings. Both of these costs are unallowable. We also found that travelers did not always file travel vouchers because INT officials authorized the contractor to provide participants with all of the cash required for travel costs. We recommended that INT only authorize allowable costs and provide cash advances that are less than the estimated travel costs, which would help ensure that travelers file travel vouchers to receive the balance of their travel costs. Small Business Innovation Research Grantee Refuses to Provide Final Project Report NSF awarded a $199,335 Small Business Innovation Research (SBIR) grant to a private, for-profit business located in the northeast to develop a suspension core drill that will maximize drilling speeds. The grantee claimed $193,102, and we questioned $52,976 because the grantee did not provide adequate documents to support indirect costs. The grantee refused to provide a final project report because NSF questioned its project performance and required that it return $6,000, failed to obtain the funding commitment from a private source for "Phase III" of the SBIR program, did not supply signed W4 forms for employees working on the grant, and did not provide a copy of Internal Revenue Form 1099 to report miscellaneous payments. We made recommendations to correct these findings, but NSF is not expected to resolve these issues until the next reporting period. Audit of Economic Forecaster Questions Claimed Costs NSF awarded a grant to a for-profit company to develop various price indexes and cost-of-living comparisons among nations, forecasts of likely industry changes, and other economic advisory services. The grantee claimed $195,667, and we questioned $22,209 of direct costs and $77,751 of fringe benefits and indirect costs claimed. We questioned these costs because the grantee: included salaries claimed for the PI that exceeded the NSF salary ceiling, claimed consultant costs that were not supported by a written agreement or invoices describing the consultant's rate of pay and level of effort, excluded travel costs from the award budget, charged the grant twice for the same supplies, included excess sick leave in the fringe-benefit cost pool, and included excess depreciation costs in the indirect cost pool. We also noted the following compliance and internal control issues: progress reports were not submitted to NSF; accounting records did not provide for a comparison of actual costs to budgeted amounts; authorization, recording, and custody responsibilities for cash disbursement were not adequately separated; written procedures describing the processing of transactions were not maintained; and a complete agreement with a primary consultant was not maintained. We recommended that NSF require the grantee to provide documentation for unsupported costs, reimburse NSF for excess and unsupported costs, comply with federal regulations, and strengthen its internal controls. Audits at Hospitals Identify Noncompliance With Federal Requirements NSF does not support clinical research, but it does fund basic biological research that is conducted at hospitals and in which hospital personnel actively participate. We audit these activities to ensure that NSF funds are being used in accordance with the grant's conditions. In Semiannual Report No. 9 (page 14), we discussed one hospital that claimed duplicate and unsubstantiated costs for equipment rented and purchased with NSF funds. During this reporting period, we found three other hospitals that had questionable claimed costs and had not complied with certain federal requirements. The results of these audits are discussed below. NSF awarded five grants totaling $649,536 to a hospital and medical center to support a conference in neuroscience, a cooperative research project with France, and other research projects related to the human anatomy. The grantee claimed $550,427, and we questioned $8,562. Questioned costs related to travel, salaries claimed, participant support costs that were not sufficiently documented, unauthorized equipment purchases, and related indirect costs. NSF awarded five grants totaling $563,144 to a northeast hospital to support research projects. The grantee claimed $369,451 in costs, and we questioned $5,522. Questioned costs related to unauthorized travel and equipment purchases, duplicate charges for outside service costs, and incorrect indirect costs claimed. Cash advances were not deposited in interest-bearing accounts, as required by federal administrative standards, and the grantee could not prove that technical progress reports were submitted to NSF as required by the awards. NSF awarded three grants totaling $167,258 to an acute-care teaching hospital to support studies in human chromosome structure and insulin-like growth factors. The grantee claimed $124,146, and we questioned $1,641. Questioned costs were related to unauthorized equipment purchases and indirect costs were incorrectly claimed. We also found that the grantee had erroneously obtained a cash advance from NSF and did not deposit this advance in an interest-bearing account. The grantee also had not recorded its required cost participation on the research projects. INTERNAL REVIEWS AT NSF We conduct annual reviews of certain financial management and internal control activities within NSF. OMB regulations and federal laws require that we participate with agency management in coordinating reviews of the Chief Financial Officer's (CFO) Act, the Federal Managers' Financial Integrity Act (FMFIA), the Contracted Advisory and Assistance Services (CAAS), and lobbying agreements. We conduct these reviews to assess the adequacy of NSF's management and to provide assistance in resolving questions that arise during NSF's regular business activities. The results of our audits of internal NSF operations are described below. Chief Financial Officer's Act In Semiannual Report No. 9 (page 9), we reported that the North Atlantic Treaty Organization (NATO) fellowship program would be included in the 1993 Donations Account Financial Statements. The change occurred as the result of our FY 1991 audit, which questioned whether the $4-million NATO fellowship program was properly classified as a deposit fund. We also reported that our audit of NSF's 1993 Financial Statements were now due to OMB by March 1, 1994. The CFO Act of 1990 originally required that NSF submit unaudited Donations Account Financial Statements to OMB by March 31 and that OIG audit the financial statements and issue auditor's reports to NSF's Director by June 30. To comply with the revised OMB timetable, the CFO submitted the 1993 Donations Account Financial Statements to us on January 10, 1994. We audited the 1993 Donations Account Financial Statements and tested the FY 1992 information that NSF included in the FY 1993 statements for comparative purposes, even though we had already conducted a complete audit of FY 1992 information. The 1992 information in the FY 1993 statements was amended to include the NATO fellowship program. We also reviewed NSF's compliance with FMFIA requirements. Our audit identified understated donated revenues due to a transfer of program funds to the U.S. Department of the Treasury. The CFO amended the statements in response to our finding. On February 25, 1994, we issued unqualified opinions on the Auditor's Reports on Principal Statements and Compliance. We issued a qualified opinion in the Auditor's Report on Internal Controls because internal control policies and procedures were not finalized for financial and program performance measure reporting. We tested all of the financial and program performance data to provide an opinion on the accuracy of such data in the financial statements. One of the purposes of the CFO Act is to provide accurate, complete, and current financial information for the government to use in financing, managing, and evaluating federal programs. Our financial statement audit plays a central role in providing management, Congress, and the public with more reliable and complete information about the effectiveness of the programs in NSF's Donations Account. Overall, we believe the preparation and audit of financial statements has improved the understanding of the Donations Account's financial condition and results. The CFO Act requires that NSF's financial statements encompass only NSF's Donation Accounts, which total approximately $23 million. This amount is only a small portion of NSF's total financial activity. We are aware that Congress is considering modifying the CFO Act to require that NSF and other agencies incorporate all of their funding in audited financial statements. In addition, NSF's Deputy Chief Financial Officer has advised us that, even if Congress does not mandate this change, NSF may prepare financial statements for all of NSF's operations and will likely formally request that we audit the expanded financial statements. If this occurs, we will be required to review expenditures totaling $3.2 billion, instead of the $23 million that we now audit. To conduct such an audit would require substantial additional resources, and we have begun discussions with NSF management and the National Science Board (NSB) to determine how we can best meet this possible, additional requirement. Financial Statements for the Ocean Drilling Program The Ocean Drilling Program (ODP) is an international program that was designed to study the movement of land masses by examining cores of earth removed from the ocean bed. The ODP is part of the Trust Fund and is supported by NSF and seven international partners (Japan; Great Britain; France; Germany; a consortium of Canada and Australia; and the European Science Foundation consortium that comprises Belgium, Denmark, Finland, Greece, Iceland, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland, and Turkey). An agreement between NSF and the seven partners that support the ODP requires that each country's contribution to the ODP and the overall income and obligations of the Trust Fund as they relate to the ODP be audited annually. In 1994, we audited the participating countries' contributions and the receipts and obligations as reflected in the Subsidiary Financial Reports and the General Purpose Financial Statements prepared by the Oceanographic Centers and Facilities Section, Division of Ocean Sciences, for the fiscal year ended September 30, 1993. During that fiscal year, the participating countries contributed approximately $16.3 million to the ODP. We found that the statements overstated contributions by $3,257. We also found that interest income was understated by $12,552. To promote consistency in operations, prevent the possible reporting of contributions that exceeded the actual amounts, and ensure that interest income is being correctly reported, we recommended that an authorizing official in the Division of Ocean Sciences review and adjust the annual status report. The report was subsequently reviewed, and the appropriate adjustments were made. Review of the NSF Time and Attendance Reporting System In 1989, NSF's Director requested that we conduct a follow-up review of NSF's Time and Attendance Reporting System to determine whether offices and divisions were adequately complying with time and attendance policies and procedures, as recommended in a 1987 audit of NSF's time and attendance activities. The follow-up review found that divisions and offices were not adhering to time and attendance policies and procedures, and the time and attendance system had not improved as anticipated. The auditors recommended that flexitime records be automated. NSF developed plans to integrate the flexitime records and the timecard systems. These systems were to be integrated in two phases. Phase 1, Electronic Time and Attendance System (ETAS), was implemented in 1990 to record employee sign-in/sign-out times. Phase 2 is the conversion of the HP Electronic Timecard System (ETS) to provide the means of integrating ETAS and ETS. As of the end of the reporting period, Phase 2 was still not complete. Timekeepers are still laboriously transferring ETAS data into ETS manually. Most NSF divisions authorize flexitime, which allows employees to earn and use credit hours. Entering and approving employee's sign-in/sign-out times is a time-consuming process that requires that all employees who are eligible to earn credit hours sign-in and sign-out in ETAS, timekeepers key these times into the ETS, and, finally, supervisors approve the recorded times. We estimate that for each NSF division to transfer all of NSF's timekeeping data from ETAS into ETS each payroll period takes 369 hours and costs about $4,900 in salaries. If these estimates are applied to the 26 pay periods in a year, the estimated annual amounts increase to 9,594 hours and $127,400. The integration of ETAS and ETS was not achieved after 4 years because NSF deferred the funds for the integration to other projects that it decided should be completed first. As a result, the government paid approximately $500,000 to manually convert data from ETAS to ETS. Continued delays in the integration of the systems will cost the government a minimum of $125,000 per year. We recommended that the responsible divisions increase their efforts to ensure that no further delays are encountered in the development and implementation of the integrated system. We estimate that NSF will save about $900,000 and put these funds to better use once the planned integration is complete. ***************************************************************** FUNDS TO BE PUT TO BETTER USE This is money OIG has identified in an audit recommendation that could be used more efficiently by reducing outlays, deobligating program or operational funds, avoiding unnecessary expenditures, or taking other efficiency measures. ***************************************************************** Review of NSF's Permanent Public Transportation Subsidy Program In July 1992, NSF implemented a 3-month experimental METRO subsidy program, which provided employees at GS-10 and below with up to $21 in farecards or tokens each month to subsidize transportation fares. In FY 1993, we reviewed the experimental program. Based on our review, the standard operating procedures were changed to improve control and operating efficiency. President Clinton signed Public Law 103-172 on December 2, 1993. This Public Law gives each agency head the authority to establish a permanent subsidy program that encourages federal employees to commute to work by means other than single occupancy vehicles. As a result of this new legislation and NSF's move to Arlington, Virginia, the Director of the Office of Information and Resource Management (IRM) announced the implementation of a permanent Public Transportation Subsidy Program beginning January 1994. The Division of Administrative Services (DAS) was delegated responsibility for administering the program and developing policies and procedures for the program's implementation, operation, and management. DAS requested that we assist in the development of internal controls relating to NSF's permanent Public Transportation Subsidy Program. As a result of our collaboration, the standard operating procedures relating to the control and distribution of the subsidies were improved. We were also able to assure NSF that the program was being implemented within the laws and regulations that established the program. Lobbying Restrictions We reviewed NSF's system for receiving, reviewing, and reporting on the implementation of section 319 of Public Law 101-121, title 31 1352, "Limitation on Use of Appropriated Funds to Influence Certain Federal Contracting and Financial Transactions." The Public Law prohibits recipients of federal funds from using appropriated funds for lobbying in connection with the contract, grant, loan, or cooperative agreement. We found that NSF's lobbying certification process is functioning as intended and designed. Contracted Advisory and Assistance Services We reviewed the system that NSF uses to comply with Public Law 97-258, title 31 1114, "Budget Information on Consulting Services," which requires that OIG submit to Congress each year, with NSF's budget justification, an evaluation of NSF's progress in establishing effective management controls. These controls should ensure that information provided to the Federal Procurement Data System (FPDS) on contracts for consulting services is complete and accurate. In FY 1993, NSF created an on-line FPDS form to generate reports from the FPDS database. We tested the accuracy of NSF's reporting of CAAS contracts on the FPDS forms and found that the controls in the FPDS that were used to capture CAAS information were reasonable. We also found that the CAAS information reported in the FPDS was complete and accurate. JOINT ACTIVITIES WITH OTHER OFFICES OF INSPECTOR GENERAL We are often asked to participate in activities with other Offices of Inspector General. These joint activities are designed to give Offices of Inspector General the opportunity to share ideas and expertise, as well as to participate in complex and broadly based projects that may be too large and time-consuming for individual Offices of Inspector General by distributing the projects' staffing requirements among several agencies. The effectiveness of interagency cooperation and collaboration among Offices of Inspector General remains a concern. Nonetheless, we have continued to participate in Executive Council on Integrity and Efficiency (ECIE) and President's Council on Integrity and Efficiency (PCIE) projects. Two of these projects are described below. Computer Systems Integrity Project Canceled In 1986, the PCIE Computer Committee (now the Technology Committee) initiated the Computer Systems Integrity Project. Overall project objectives were to assess the integrity of federal computer systems and develop recommendations for governmentwide improvements in standards, procedures, documentation, and operations affecting computer systems integrity. The maintenance of applications software was selected as the topic of Task 4 because a significant percentage of IRM funds are expended in this area. In Semiannual Report No. 8 (page 10), we reported that we had completed the first (survey) phase of Task 4A, which included developing an agency IRM profile, gathering specific information regarding agency management of the software maintenance process, analyzing selected agency systems for application maintenance risk based on measurable system characteristics, and writing a report to describe NSF's management of the software maintenance process. Although there was general agreement that the survey phase of this project had provided useful information, the coordinating agency has canceled the program because of funding constraints. Peer Review of an Office of Inspector General The Inspector General Act of 1978 requires that the operations of the offices of audit in OIGs be subject to a peer review every 3 years. A peer review is conducted by an OIG or personnel from several OIGs that have no reciprocal relationships with the entity being reviewed. OIGs do not directly exchange staff to conduct peer reviews. Instead, assignments are made from pools composed of staff from many OIGs to ensure that there is no appearance of reciprocal favorable assessments. A peer review is intended to assess compliance with legislative and professional standards for OIG audit operations. We have contacted the OIG that will be the subject of the review and have held initial discussions on the procedures to be employed. We have also sent an ECIE-approved questionnaire to be filled out before we begin our on-site review. During the next reporting period, we will conduct our on-site review and prepare a report that summarizes our findings. This report will be sent to the OIG that we reviewed and will be discussed in our next semiannual report. INVESTIGATIONS The Investigations section is responsible for investigating violations of criminal statutes or regulations involving NSF employees, grantees, contractors, and other individuals conducting business with NSF. The results of these investigations are referred to federal, state, or local authorities for criminal or civil prosecution or to NSF's Office of the Director to initiate administrative sanctions or penalties. EMBEZZLEMENT OR DIVERSION OF NSF GRANT FUNDS We place a high priority on allegations involving embezzlement, diversion of grant or contract funds for personal use, or other illegal use of NSF funds. Deliberate diversion of NSF funds from their intended purpose is a criminal act that can be prosecuted under several statutes. We encourage universities and other grantees to notify NSF of any significant problems relating to the misuse of NSF funds. Early notification of significant problems increases our ability to investigate allegations and take corrective action to protect NSF and its grantees. _________________________________________________________________ TABLE 1: INVESTIGATIVE ACTIVITY Active Cases From Prior Reporting Periods 25 New Allegations 27 Total Cases 52 Cases Closed After Preliminary Assessment 3 Cases Closed After Inquiry/ Investigation 22 Total Cases Closed 25 Active Cases 27 _________________________________________________________________ The following section describes cases involving the diversion of funds that we investigated during this reporting period. Investigations of Fraud in SBIR Awards In this and previous semiannual periods, we conducted several investigations involving recipients of SBIR grants. Because 11 federal agencies have SBIR programs, and small businesses that seek SBIR awards from one agency tend to also seek them from others, we have coordinated these investigations with investigators from other agencies. In this reporting period, we continued to work closely with two U.S. Attorney's offices on investigations involving SBIR grantees. We made substantial progress with an investigation of an SBIR grantee that submitted fraudulent information and forged documents to obtain SBIR funding. By providing this false information, the grantee received, or had been selected to receive, approximately $2.8 million in SBIR funds. We also analyzed systemic issues that arose as a result of our ongoing investigations involving the SBIR program. Vice President Gore's National Performance Review recommended that Inspectors General use the results of investigations to "help managers evaluate their management control systems" and make recommendations to "help improve systems to prevent waste, fraud and abuse, and ensure efficient, effective service." Based on the National Performance Review, the PCIE urged all Inspectors General to "enhance the effectiveness of investigations in facilitating positive change" and "examine the underlying causes of fraud . . . and recommend ways that program vulnerabilities can be reduced." As a result of investigations of SBIR grantees, we recommended systemic changes in NSF's administration of its SBIR program. We also worked with NSF to ensure that its new fixed-price, Phase II SBIR Grant General Conditions provides adequate protection for NSF and made other, specific recommendations to prevent fraud in the SBIR program. Assets Frozen for Grantee That Allegedly Defrauded NSF We continued to lead an investigative team consisting of special agents from NSF, the National Aeronautics and Space Administration (NASA), and the Department of Defense (DoD). This coordinated effort previously found evidence that the owner of a small, high-technology business in California repeatedly submitted duplicate proposals to, and received duplicate funding from, NSF, NASA, and various DoD agencies without informing the agencies as required by agency solicitations (see Semiannual Report No. 9, page 17). The company made numerous false statements to conceal the "recycling" of 11 research ideas 40 times in duplicate submissions to the SBIR programs of different federal agencies. In addition to the submission of numerous false statements, the defendants billed the government for the cost of engineering labor by two of the three defendants, when in fact they did not perform engineering work. The company fraudulently obtained approximately $1.4 million in SBIR funding, and it had been selected to receive an additional $1.4 million in federal funds. As a result of our recommendations, NSF suspended the company from receiving new federal awards. This action, resulted in the governmentwide suspension of awards totaling $1,395,311. We found evidence that the defendants were preparing to take their assets and leave the country. The defendants put their home and their business property on the market and began transferring large sums of money to an overseas financial institution. We told the U.S. Attorney's Office that the assets were likely to be moved outside the reach of the government and that action should be taken to protect the government's interest. Attorneys and investigators in our office assisted the U.S. Attorney's Office in filing a complaint to seize assets under the 1990 Federal Debt Collection Procedures Act (FDCPA). In one of the first FDCPA actions of its kind nationwide, a U.S. District Court Judge ordered the U.S. Marshall to seize the defendants' property and bank accounts to ensure that the defendants could not dissipate their assets. The Judge froze the assets because, in the Court's opinion, the complaint and supporting documentation demonstrated that the defendants were attempting to sell their properties and transfer their money overseas to avoid paying damages. To secure the assets, the Court imposed liens on the defendants' million-dollar house, million-dollar commercial building, and laboratory equipment worth about $250,000, and froze their personal and company bank accounts, which contained over $500,000. Under the FDCPA, defendants are informed of their right to receive a prompt court hearing to contest the freezing of assets. They also have the right to claim that certain types of property are exempt from seizure. While the assets are frozen, they remain under the control of the government, and are turned over to the government if and when the court renders a final judgment in the government's favor. Based on our investigation, the U.S. Attorney also filed a civil complaint charging the company and its owners and officers with fraud on a federal program designed to promote scientific research. The complaint seeks $4.2 million in damages for violations of the False Claims Act. The defendants have not yet responded to the civil complaint, and the U.S. Attorney's Office is reviewing the criminal aspects of this case. SBIR Phase II Grant General Conditions NSF's funding for the SBIR program is divided into two phases. The first phase provides a fixed amount of support for exploratory research. If this research is successful, significant additional funds may be provided in the program's second phase to assist in the principal research effort. Phase I of the SBIR program involves fixed-price awards, while Phase II awards require that the grantee account for its costs. Recipients of Phase II grants must follow the same accounting rules and establish accounting systems that have been designed for large entities. These rules and systems can impose a significant burden for a small business that receives only one or two federal grants. To alleviate this burden, NSF decided to make the Phase II awards fixed price as well. Applicants will be required to document the basis for the cost and price information they submit to NSF, but the administrative burden to account for specific expenditures after receiving the award will be significantly reduced. We support NSF's efforts to alleviate the burden placed on small business grantees. However, we are concerned about the increased potential for fraud that would result from decreased accountability. Based on insights derived from our SBIR investigations, we held a series of meetings with NSF staff to discuss ways of reducing the potential for fraud while alleviating the administrative burden placed on small business grantees. We reviewed the draft SBIR Phase II Grant General Conditions (SBIR-II) to ensure that NSF will receive adequate cost and pricing information to evaluate before making the award and adequate information to allow NSF to take action in the event a serious problem arises after the grant has been awarded. As a result of our discussions with CPO (the NSF office responsible for amending the SBIR-II), the draft SBIR-II was changed to address some of our concerns; however, some of our suggestions were not adopted. Based in part on our discussions, CPO decided to require that SBIR grantees provide NSF with semiannual progress reports that document technical progress on the grant. If NSF does not find the progress acceptable, the grant can be suspended or terminated. CPO also agreed to ensure that SBIR grantees provide specific information on the amount of time each PI and key employee expends and an estimate of the amount expended on the grant as of the date of the progress report. Payments are contingent on NSF's acceptance of the progress reports, and the SBIR-II was amended to clarify NSF's right to modify the payment schedule, suspend the award, or terminate it on the basis of these reports or any other pertinent information. On each progress report, a representative of the grantee company will be required to certify that the PI remains primarily employed by the grantee and that no duplicate funding for the project has been sought or received from any other federal agency. We also arranged a trial period with CPO in which our auditors will review every SBIR Phase II proposal before NSF makes the grant to help ensure the adequacy of the cost and pricing data supplied. We recommended that the grantee be required to submit a budget with each progress report, and that the budget be revised as necessary to reflect any changed circumstances the grantee had become aware of. Alternatively, we requested that NSF staff consider implementing a certification whereby awardees would state that the award funds had been spent in accordance with the proposal budget. We also suggested that NSF provide progress payments similar to those in the FAR for fixed-price awards. A fourth alternative was that awardees be required to report if there were material differences in the categories of costs incurred as compared to the proposal budget. As of the end of this reporting period, NSF staff had not agreed to any of these recommendations, and we remain concerned about the risk to the agency if it is not provided with adequate financial information about how federal funds are actually spent. Because Phase II awards are significantly larger than Phase I awards (about $300,000 compared to about $75,000), we will ask NSF's Director to evaluate this issue. We will closely monitor the implementation of this new approach to funding Phase II awards, and we will report developments as they occur. Systemic Recommendations In Semiannual Report No. 9 (page 18), we recommended that an interagency database be established for the SBIR program. Once implemented governmentwide, this information will reduce the likelihood of fraud of the type encountered in our investigations of SBIR grantees. During this reporting period, the 11 federal agencies that fund SBIR research made some progress toward the goal of establishing such a database. The most significant problem that we encountered in the SBIR program, as illustrated in the case discussed above, is the submission of duplicate proposals to various agencies and the acceptance of duplicate funding for the same or overlapping work. We made a number of suggestions to ensure that NSF is notified when duplicate proposals are submitted or funded. We recommended that: NSF clarify and emphasize the prohibition against the receipt of duplicate proposals; proposers be required to certify clearly that the proposal is not duplicative; NSF require that proposers list and describe all of the Phase I and Phase II awards their company has received in the past 5 years; and NSF require that awardees submit a certification with each final report stating that the work described is original work conducted under that particular SBIR award, and no overlapping financial support was received for this work. We found that some SBIR awardees exaggerated the experience and educational background of the PIs and key personnel in their proposals, and that sometimes the prospective PI identified in the proposal did not work on the funded project at all. We made recommendations to help prevent these problems and to ensure that NSF can take action when they do occur. To ensure that PIs and company representatives are aware of their responsibilities under SBIR awards, we recommended that, at the time of the award, they be required to certify to NSF that no duplicate funding has been accepted, all duplicate proposals have been withdrawn from other agencies' consideration, and the PI is primarily employed by the company. To ensure that NSF is aware of changes in the status of certifications and the budget, we recommended that NSF require that awardees certify, in semiannual reports, the truth and accuracy of the answers to questions regarding duplicate submissions and funding, the PI's primary employment, and the accuracy of the current award budget. Since these recommendations could be relevant to other SBIR agencies, we recommended that NSF share them. We will report on NSF's response to these recommendations in our next semiannual report to the Congress. OTHER DIVERSION CASES University Employee Allegedly Embezzles NSF Funds An internal audit by a midwest university disclosed that a university employee had allegedly embezzled $7,815, which included $6,415 from six different NSF grants. The employee was the fiscal officer for a university department that frequently paid honoraria and expenses for visiting lecturers. The fiscal officer allegedly forged the names of faculty members on payment requests for fictitious international scholars then cashed the checks or deposited them into a personal account. The fiscal officer confessed to local law enforcement officials, who referred this matter to the County Prosecuting Attorney. The university reimbursed NSF $9,440, which included the $6,415 that the fiscal officer embezzled and $3,025 of indirect costs. Improper Salary and Travel Charged to NSF Grant In March 1993, we received an allegation that a PI received duplicate salary payments from NSF and another federal agency. The PI, a faculty member at a southern university, was allegedly paid for full-time research during the summer of 1992 by NSF and the other federal agency. The PI did not disclose to either NSF or the other agency that he was receiving funding for the same time period from another source. An investigation by OIG and the university revealed that during the summer of 1992 the PI was paid by both NSF and the other federal agency for full-time effort, resulting in improper salary payments of $9,773. We also found that the PI improperly charged travel costs to the grant after the grant had expired. While our investigation found no intent to defraud, the university found that the PI's actions were inconsistent with university policy. The PI reimbursed the university, and the university credited NSF a total of $15,720 for the improper salary and travel payments plus indirect costs. Payroll Overcharges Made to NSF Grant We were contacted by officials at a state science museum and center about possible false payroll charges to an NSF grant. During an exit interview with a museum official, a center employee allegedly admitted to falsifying timesheets. We conducted a review with center officials and found no evidence of fraud, but found a total of $8,525 in payroll overcharges to the grant. Center officials agreed to deduct this amount from their next request for NSF funds. Follow up on Underreported Unobligated Funds In Semiannual Report No. 9 (page 18), we reported that an investigation of allegations of misuse of funds at a southern university found no evidence of criminal wrongdoing on the part of the university's officials or employees. However, we did find that the university underreported unobligated (residual) grant funds. Based on our recommendation, NSF reduced the university's FY 1994 program funds, which resulted in a savings of $381,171. The University told us it underreported unobligated grant funds because it estimated those amounts in its proposals for follow-on funding. However, the university never reported the accurate amounts of unobligated funds to NSF after the amounts were finalized. NSF's Program Office instructed the institution to provide accurate and timely reports of unobligated funds before each year's award is finalized. In addition, officials from NSF and the Office of Naval Research, the other agency responsible for ship operations, met to discuss ways in which the government could more closely monitor the ship stabilization account's expenditures. At that meeting, we and the Office of Naval Research decided on specific language that will be incorporated either in the terms and conditions of future awards or in directives from the agencies. OTHER INVESTIGATIVE MATTERS Conflict of Interest Involving Former Employee During an investigation, we identified a possible conflict of interest involving a former NSF program officer. The former program officer participated in the initial reviews and awards for a new minority education program during her tenure at NSF. After her resignation from NSF, the former program officer took a position as acting PI at a university working on one of the programs that she had recommended for award. The former employee became the PI for the program, and a substitute negotiator was named for that award. Before her departure from NSF, the former employee sought advice on two occasions from NSF's Acting Designated Agency Ethics Official (DAEO) regarding her acceptance of the position at the university and continuing to work as an unpaid consultant for NSF after she began working for the university. During these meetings, the DAEO asked the former employee about her level of involvement with the NSF-funded project, which was awarded to her intended future employer. The former employee stated that she had not been involved with that project. Based on these meetings, the DAEO provided general conflict-of-interest advice to the former employee. The former employee also discussed post-employment restrictions with another attorney from NSF's Office of General Counsel (OGC) during an exit interview. The employee left NSF believing that only the NSF 1-year, postemployment restriction applied to her in future dealings with NSF. We found no evidence that the former employee took action on the award during her negotiations for employment with the university or that she negotiated with NSF (or represented the university to NSF) after becoming a university employee. However, our review of the NSF program jacket revealed that the employee had been involved in the NSF-funded project--for example, she signed a recommendation for supplemental funding for the project. When provided with a draft of our report, the DAEO amended his position and informed the former employee that he had concluded that a permanent, postemployment restriction was applicable because she had been personally and substantially involved in the initial award. Current and former NSF employees are personally responsible for avoiding conflicts of interest. We believe this case developed as it did because the former NSF employee relied on her recollection of her actions regarding the NSF-funded project without checking the project file to see what her level of involvement with the project actually was. We recommended that OGC ethics counsellors take additional action in situations in which an NSF employee is leaving to work on an NSF-funded project. In those situations, OGC ethics counselors should suggest that the employee review the NSF program jacket for that project for any indications of involvement by that employee, particularly the presence of the employee's name and/or signature on documents in the jacket. If the employee finds any documents that indicate the employee was involved with that project, the employee should discuss them with the ethics counselor. NSF agreed to implement our recommendation. _________________________________________________________________ Table 2 New Referrals 1 Referrals From Previous Reporting Period 3 Prosecutorial Declinations 2 New Indictments 0 Indictments From Previous Period 0 Criminal Convictions/Pleas 0 Civil Complaints Filed 1 Administrative Actions 3 Investigative Recoveries* $414,856 *Investigative Recoveries comprise civil and criminal judgments, fines, and restitutions as well as specific costs savings for the government. ----------------------------------------------------------------- NSF-Sponsored Screener Terminated From General Services Administration Program We assisted in an investigation conducted by the Defense Criminal Investigative Service and the General Services Administration's (GSA) Office of Inspector General of thefts and abuses of GSA's Utilization and Donation Program, which recycles federal equipment and property. Under this program, GSA approves and issues Screener Identification Cards that entitle the bearer to physically screen and select excess property for transfer to private sector entities for use in federally funded activities. NSF-funded research centers are authorized to participate in the program by having the NSF property manager submit a request to GSA for a Screener Identification Card listing the screener's name and organization. Because NSF submits the request to GSA, NSF sponsors the screener and is responsible for the screener's actions. The investigation revealed that an NSF-sponsored screener, who was a contractor for an NSF-funded research center, attempted to remove property from a DoD reutilization site without authorization. We did not find evidence that the NSF-sponsored screener attempted to remove the property for his personal benefit, but we did find evidence of unauthorized use and abuse of screening privileges. GSA terminated the NSF-sponsored screener's authorization and banned the individual from the program. THEFTS IN NSF BUILDING Building Security--OIG Provided Assistance and Advice NSF's phased move from Washington, D.C., to Arlington, VA, resulted in an increase in reported thefts in both buildings. During the move, NSF's staff was split between two locations, and both buildings had more contract workers and movers entering and exiting; both sites were more vulnerable to thefts. Thefts at the Washington, D.C., location included cash, credit cards, and an attempted theft of a computer. Thefts at the Arlington, VA, location were more frequent and included wallets, cash, credit cards, an automatic teller card, small appliances, travelers cheques, and a passport. In December 1993, a car was stolen from an NSF employee at the Arlington location. At DAS' request, we provided advice and assistance about the theft problem. DAS responded to the thefts by issuing identification badges to all construction and contractor employees, restricting building access, and increasing the security force at the Arlington location. DAS also educated NSF staff about security issues through electronic mail and classes on security precautions. By January 1994, the number of thefts reported was decreasing. Either the Federal Protective Service or the Arlington County Police investigated most of these thefts. However, the Investigations section has provided investigative assistance to resolve several internal theft problems. Below are summaries of two cases resolved during this period. Theft of Travelers Cheques On December 17, 1993, DAS notified us that American Express Travelers Cheques being delivered to the NSF Credit Union had been stolen. We worked with the Arlington County Police and American Express Security to identify suspects. Several of the stolen cheques had been negotiated by signing initials on the cheques instead of a full name, making it difficult to identify who negotiated the stolen cheques. We identified an NSF contract employee as the only individual who had the opportunity to steal the cheques. After being confronted with the evidence against him, the contract employee allegedly threatened several other contract employees. The contract employee was removed and subsequently banned from the NSF work site. After reviewing his actions, the NSF contractor terminated the contract employee. Since the only suspect did not reside in Arlington and no longer worked in Arlington, the Arlington County Police decided not to pursue the matter. Theft of NSF Mail We were informed by the U.S. Postal Inspection Service that NSF mail had been found dumped in a trash receptacle several miles from NSF's location. We found information suggesting that a contract employee in NSF's publications processing warehouse had disposed of more than 600 requests for publications over a period of several weeks. We confronted the employee with evidence of his actions. The employee resigned in lieu of termination and was barred from NSF work sites. OVERSIGHT The Office of Oversight focuses on the science-engineering-education-related aspects of NSF operations and programs. It oversees the operations and technical management of approximately 200 NSF programs that received about 61,000 proposals in FY 1993. The Office conducts and supervises compliance, operations, and performance audits as well as investigations of NSF's programs and operations; undertakes inspections and evaluations; and performs special studies. It also handles all allegations of nonfinancial misconduct in science, engineering, and education and is continuing studies on specific issues related to misconduct in science. MISCONDUCT IN SCIENCE MISCONDUCT CASES ARISING FROM COLLABORATIVE RELATIONSHIPS Scientists collaborate to combine their different areas of knowledge and to enhance their individual abilities as researchers. Most collaborations succeed, but when they fail, OIG sometimes receives allegations of misconduct in science. Usually, these concern rights to intellectual property used or developed during the collaboration. In our reviews of several cases handled during this reporting period, we made three important observations. First, the intellectual property rights of collaborators depend on the nature of the collaboration. At one extreme, are collaborations where clearly separate and independent contributions are "stitched" together. At the other extreme, are collaborations where the individual contributions have become so "fused" that separating them is virtually impossible. Over time, as collaborations progress, the different contributions tend to become more integrated. Collaborations can break down at any stage. Depending on how integrated the components of a collaboration are and at what stage it breaks down, OIG has made different judgments about the intellectual property rights of the collaborators. Second, the unequal status of collaborators creates opportunities for exploitation, and junior scientists who believe that they have been exploited often raise allegations of misconduct in science. There is much potential gain for junior scientists in collaborative relationships, but also a danger that senior collaborators will unfairly deprive junior colleagues of the credit due them. Third, there is disagreement about the norms governing collaborative relationships. Some scientists consider actions misconduct in science that others believe are acceptable or, at worst, undesirable. We receive allegations of misconduct based on different interpretations of community norms and we sometimes are unable to do anything about undesirable practices because there is no generally understood standard that they violate. ________________________________________________________________ TABLE 3: MISCONDUCT CASE ACTIVITY First Last Half Half 1994 1994 Active Cases From Prior Period 81 87 Received During Period 31 27 Closed Out During Period 25 34 In-Process at End of Period 87 80 _________________________________________________________________ ***************************************************************** NSF's DEFINITION of MISCONDUCT in SCIENCE and ENGINEERING Fabrication, falsification, plagiarism, or other serious deviation from accepted practices in proposing, carrying out, or reporting results from activities funded by NSF; or retaliation of any kind against a person who reported or provided information about suspected or alleged misconduct and who has not acted in bad faith ****************************************************************** The cases discussed below illustrate these observations. Independent Use of Materials Generated in a Failed Collaboration. Two PIs agreed to collaborate on a proposal. Over a short interval (15 days), they briefly discussed their project and independently developed their separate sections for the proposal; however, 1 day before the submission deadline, the second PI broke off the relationship because of interpersonal differences. The first PI completed the proposal, which retained the second PI's contribution, revised the proposal to reflect the second PI's absence, and submitted it to NSF. The second PI, who did not have a position at her institution that permitted her to submit a federal grant proposal, established a working relationship with a third, more senior PI, who agreed to "front" the proposal for her. Together, they submitted a proposal that contained the second PI's text. Despite the fact that all three PIs were attached to the same department, neither the first nor the second PI knew the other had used the text in question, and neither mentioned the other's contribution in the proposal submitted. An NSF program officer noticed that the two proposals contained a substantial amount of identical text, and this led to an allegation of plagiarism. The PIs' university investigated the allegation. It found that the materials drafted by the two ex-collaborators were easily separable because their contributions described different fields of study. The first and second PIs both felt they had a right to use the material, the first PI because he had participated in their joint discussions and had thought about the project before his contact with the second PI, and the second because she was the author. The university concluded that the first and second PIs had erred in failing to inform each other of their subsequent use of the material, but that the second PI, being the author of the common material, had less of an obligation to her collaborator than he did to her. While finding that both investigators, to different degrees, had not shown sufficient regard for "professional etiquette and collegiality," the institution did not consider their actions to be misconduct in science. In its evaluation, the investigating committee cited the two PIs' inexperience and their difficulties with English as mitigating factors. The investigating committee said that if the institution had a solid training and oversight program for its less experienced investigators, this situation might have been avoided. The institution also cautioned the third PI about assuming responsibility for the contents of a document without having carefully reviewed it. OIG concurred with the institution's assessment. Independent Use of Collaborative Ideas after a "Fused" Collaboration Has Concluded. A postdoctoral researcher submitted to another agency a proposal that she jointly developed with a senior colleague at another institution. The two researchers conducted their collaborative experiments at the colleague's laboratory using materials she had brought to the collaboration. The two did not work well together and planned to discontinue the collaboration. Without informing her, the senior colleague subsequently submitted a proposal to NSF using the postdoctoral researcher's materials and the knowledge that he had gained during their collaboration. His submission proposed new, but related, research and named a new collaborator. The postdoctoral researcher alleged that this action constituted intellectual theft, since ideas and materials she had initially brought to their collaboration were now an integral part of his proposed independent work. We concluded that this was not intellectual theft because each collaborator is entitled to use experimental samples, data, and jointly written materials that were the products of collaborative work in subsequent independent endeavors. We noted that, in this case, the postdoctoral researcher's contribution was appropriately acknowledged. In other cases, however, where researchers have subsequently reused collaboratively developed products, we believe that clearer acknowledgements of these prior efforts might have prevented allegations of misconduct from arising. Independent Use of Ideas After a "Stitched" Collaboration Has Concluded. A scientist excerpted portions of text from an article he wrote and included them in a collaborative proposal that he and a colleague submitted to another government agency. The colleague then reused the text in question years later in a proposal to NSF. A reviewer noticed that four paragraphs of text from the article appeared without attribution in the colleague's NSF proposal. Since the copied material was the original author's own work and had subsequently not been altered by the colleague, we concluded that it was inappropriate for the author's ex-collaborator to reuse the material in the new proposal without explicitly acknowledging its source. We determined that the colleague's actions did not constitute misconduct because the material had appeared in a proposal that was co-authored by the colleague and the original author. We found that the colleague had been careless in reusing the copied material without attribution to the original source document. We requested that he amend his NSF proposal by including a citation to the original source. Acknowledging the Role of Junior-Level Collaborators. A senior researcher submitted a proposal containing material written by a postdoctoral researcher working under his supervision. The proposal named the senior researcher as the sole PI. The senior researcher did not explicitly acknowledge the postdoctoral researcher's contribution to the proposal, but he clearly indicated the postdoctoral researcher as a key collaborator in the research and included his curriculum vitae in the proposal. The senior researcher decided that his collaborator was not sufficiently mature as a scientist to share co-PI responsibilities. Our informant alleged that, by failing to name the postdoctoral researcher as a co-PI, the senior researcher had deprived the postdoctoral researcher of credit for his contribution to the proposal. We concluded that a reasonable scientist reading the proposal would expect that the postdoctoral researcher had helped prepare it and that the senior researcher's action did not constitute misconduct in science. But it appeared that the senior researcher had been less than candid about the responsibilities and status he intended to give his colleague in the project. We believe that collaborators should, at the outset, specify the minimum status each can expect on the project. The norms governing allocations of PI status are sufficiently vague that, in the absence of an explicit promise, we did not believe this was misconduct in science. But senior scientists who encourage their subordinates to work harder by permitting them to harbor unrealistic hopes about future responsibilities and credit are, at best, engaged in an ethically questionable practice that can lead to allegations of misconduct. Many of the situations we have encountered could have been avoided if collaborators developed a firm understanding of their rights and responsibilities before they began work on a project. However, in cases where collaborators are substantially unequal in status, explicit agreements might merely formalize unfair allocations of credit. Collaborators do well, at the outset, to make clear their rights to the ideas and data developed during the collaboration and should understand that they are responsible for all aspects of the final product, including data review, experimental design, and written text. During a recent inspection, we reviewed one institution's policy on conducting research that reflects sensitivity to the ethical issues collaborations can raise. Although we do not believe it is essential to have written policies defining the responsibilities of collaborators, we believe that participants would be well served if they devoted thoughtful time to, and if institutions provided some guidance on, some of the issues outlined above before beginning work on a collaborative project. Allegations Involving Data Interpretation and Standards of Practice We received allegations that a field geologist had fabricated field measurements, misrepresented a locality, and had falsified data while working under an NSF award. Our inquiry, which included the assistance of an outside expert, found that these allegations had no substance. The complainant assumed that the subject's field measurements had been fabricated when he was unable to confirm them himself. We determined that the complainant had searched a related nearby area, and not the subject's actual field area. Independent confirmation of the subject's original field results was available. This allegation involved differences in interpretation of the geographic extent of a geologic structure. It was also alleged that in a journal article, the subject had misrepresented the significance of, and excluded a field measurement taken at, an outcrop. We determined that the outcrop was difficult to interpret, and at least three different interpretations were possible including the subject's. Consequently, his exclusion of this measurement from the data he took in the region was within the realm of the subject's professional judgment under the circumstances. This case underscores that reasonable differences in interpretation of research results are not misconduct in science issues. It also demonstrates that in field geology, unique practices exist that, although different from generally accepted practices of geology as a whole, do not deviate from commonly accepted practices within a smaller subunit of geology. NSF's regulations on misconduct in science allow for differences in accepted practice in different fields and subfields of science. Accessibility of Laboratory Notebooks We received an allegation that a biologist, who was a PI on an NSF award at a northeastern university, had knowingly presented and published data fabricated by his graduate student. At the university's request, we deferred the inquiry and any possible investigation into this allegation to it. The committee found that the subject permitted all departing students and researchers to take their laboratory notebooks with them and that he had not retained copies of any of that material. The subject stated that he felt the practice of permitting departing personnel to take their laboratory notebooks with them was common in the scientific community. He denied any knowledge of data fabrication by the student. The subject showed the committee data from similar experiments and suggested that the questioned data were not fabricated because analogous experiments produced similar data. We obtained a copy of data the graduate student had retained and sent it to the university's investigating committee for analysis. The committee concluded that there was no evidence to support the allegations. We concurred with the institution's conclusion and closed this case without a finding of misconduct. We were, however, concerned about the institution's policy with regard to laboratory notebooks and requested further information. The grantee institution should be able to produce or locate research materials as part of a misconduct inquiry or investigation. The institution reviewed its policy and is currently establishing and promulgating a policy on the retention of materials produced under an NSF award. Failure to Provide Access to Data Collected Under an NSF Award The National Science Board has directed that scientists share "data, samples, physical collections and other supporting materials created or gathered in the course of" NSF-supported research in a timely manner. A PI on an NSF grant had taken data collected on a grant with him when he left the institution for a nonacademic position. A colleague made repeated requests for the data and subsequently enlisted the aid of an NSF program officer to obtain the data. Despite repeated promises to release the data, the PI failed to do so. These data were viewed by the colleague and other members of the scientific community as historically important. We contacted the PI several times and were assured each time that the data would be released to the colleague. The data were not. We informed the PI that we would begin an investigation into the case because he had broken many promises to share data over the years. This behavior raised questions about the existence of the data. His reluctance raised a concern that some of the data might have been fabricated or falsified and that close scrutiny by other investigators would uncover this problem. The subject has finally sent the data to a repository where they will be available to interested scientists. We viewed the release of these data as an appropriate resolution of the case. We are committed to upholding the NSB's expectation that scientists will openly share materials and findings collected under NSF awards. NSF Action on a Misconduct Case In Semiannual Report No. 9 (page 26), we discussed a case in which two PIs made false statements to NSF in grant proposals and letters. These false statements exaggerated the extent of the services that their college offered Native American and Hispanic students. The first PI made the original false statements. The second PI used the first PI's false statements as the basis for statements in his own proposal. We recommended that NSF's Deputy Director find that the two PIs committed misconduct in science. We also recommended a finding of misconduct in science against the college based on the fact that college officials approved the proposals, and the misrepresentations concerned matters within the college's knowledge and control. We do not expect institutions' reviewing officials to assess the technical content of proposals, and institutions ordinarily bear no responsibility if a proposal contains false statements about science or engineering. However, we expect institutions to take responsibility for the truth of statements in proposals that concern matters within the institution's purview, such as the minority programs that those institutions operate. Therefore, we believe the college is partly responsible for the false statements sent to NSF. The Deputy Director found that the PI who first produced the false statements was guilty of misconduct. When considering what action to take, the Deputy Director noted that the first PI "submitted false statements to NSF in connection with three different NSF grant proposals, clearly demonstrating a pattern of such behavior with obvious implications for any future proposals. . . ." Accordingly, as we recommended, for 3 years, every proposal the first PI submits to NSF must be accompanied by a written certification that the representations in it involving minority programs are true. For 3 years, the first PI will not be allowed to act as an NSF reviewer, advisor, or consultant. Although the Deputy Director decided that the second PI incorporated some of the false statements from the first PI's proposals into his own proposal, the Deputy Director concluded that the second PI did so "apparently without realizing their inaccuracy" and therefore his false statements to NSF were not a serious deviation from accepted practices. Although no finding of misconduct was made against the second PI, the Deputy Director cautioned him to "exercise greater care in relying on others as sources of unpublished factual material for grant proposals." The Deputy Director concluded that it is not unreasonable to expect an institution reviewing grant proposals to take responsibility for the accuracy of background information specifically within the purview of the institution. He agreed the college was less than diligent in reviewing the proposals at issue and that this was a practice he could not condone. Based on our investigation, the Deputy Director agreed to settle the case against the college without a finding of misconduct in return for the college's agreement to comply with our recommendation. Thus, for 3 years, every proposal submitted to NSF from the college will be accompanied by a certification (sent separately to OIG) that any representations in the proposal involving programs for minority students are true to the best of the signer's knowledge. _________________________________________________________________ STAFF ACTIVITIES Members of the scientific staff published two papers during the reporting period. The first appeared in Accountability in Research: Policies and Quality Assurance, 3 (1993), "NSF's Approach to Misconduct in Science." The second, "Investigating Misconduct in Science: The National Science Foundation Model," was jointly written by scientists and lawyers and appeared in "The Journal of Higher Education," 65, (1994). The senior staff also made presentations at the annual meeting of the Society for the Social Studies of Sciences at Purdue University and to departmental chairs at the annual meeting of the Association for Medical School Pharmacology. They spoke at the American Association for the Advancement of Science/American Bar Association Practicum on conducting university inquiries into allegations of misconduct in science, at a University of Maryland seminar on Ethics in Science, and a seminar on misconduct in science at the University of North Carolina, Chapel Hill. _________________________________________________________________ INSPECTIONS AND EVALUATIONS In March 1993 the PCIE issued its "Quality Standards for Inspections" to guide the conduct of inspection work. These standards define an inspection as a process, other than an audit or investigation, that evaluates, reviews, studies, and/or analyzes the programs and activities of a Department or Agency to provide information to managers for decisionmaking; make recommendations to improve programs, policies, or procedures; and recommend administrative action. We view inspections as an especially effective approach for OIG oversight in our agency because of the highly technical nature of NSF's mission. Our inspections are on-site reviews both within NSF itself and at institutions that receive NSF funding. OIG staff assesses organizations' compliance and effectiveness in three major areas: finance, administration, and achievement of science and engineering program goals in research and education. Our inspections supplement OIG's ongoing audit and investigative activities by broadening accountability beyond financial and administrative compliance requirements to assess the responsiveness of research and education activities to program goals. Our external, on-site reviews also promote an increased awareness by PIs and their sponsoring institutions of the importance of accountability in the management of, and performance under, NSF awards. In all inspections, we act as an unbiased conduit for PIs' and university officials' comments, criticisms, and suggestions on NSF's operations. The composition of any inspection team depends on the expertise required to understand the research or activity to be inspected. Team members may include scientists and engineers, auditors, computer specialists, investigators, lawyers, or management/program analysts. If the expertise is not represented by OIG staff, consultants from the private sector or other federal agencies may be used. Evaluation of the inspected institution's policies and procedures, award documentation, and related financial records is performed both before and during the inspection. The following three sections make up an inspection report. Financial Review Our objectives here are to evaluate the adequacy of internal controls for NSF awards within the department or other institutional subunit and to assess compliance with the institution's financial policies and procedures established to meet federal law and regulations. Management and Administrative Review The objectives of this portion of the inspection are to evaluate the institution's ability to resolve allegations of misconduct in science and to determine the adequacy of the institution's handling of misconduct allegations; assess the institution's compliance with regulatory requirements, such as drug-free workplace, lobbying certification and reporting, and nondiscrimination; assess the climate for advancement by women and racial minorities as scientists and faculty members; and learn about and evaluate any institutional requirements governing employees' financial disclosures. Program and Research Review The objectives of this portion of the inspection are to assess the scientific aspects of the projects funded under the awards reviewed, evaluate the adequacy of the facilities and other institutional support for these efforts, determine the PIs' views on issues related to the NSF awards covered by the inspection, and develop an understanding of the PIs' impressions of the quality and adequacy of NSF's proposal review and award processes including NSF program officials' interactions with PIs. Problem Areas From Our Five Inspections We have now conducted five inspections, and several common concerns have emerged. All five inspections raised questions related to the institution's procedures for handling allegations of misconduct in science. At two institutions, clarifications or changes would be necessary to ensure complete compliance with NSF's regulation on Misconduct in Science and Engineering. At these two institutions, we are concerned about the school's understanding of NSF's definition of an inquiry, the necessity of conducting an investigation when an inquiry shows it is warranted, and the standard of proof required in adjudicating misconduct. Also at issue were the institution's responsibilities for maintaining access to data and records of data generated under federal awards. None of the five institutions had written policies on access and retention of data recorded in notebooks or elsewhere. A policy of this kind is particularly helpful when a PI leaves the institution. In four of the five inspections, although we found the internal control structure was generally satisfactory and the finance departments complied with NSF's award documents, the Grant Policy Manual, the Grant General Conditions, and other federal requirements, we did make recommendations regarding internal controls and compliance. To three of the five institutions, we recommended establishment and use of separate expenditure accounts to ensure that cost sharing is traceable in the official books of account and to support fully other contributions reported to NSF. We also recommended that two of the five institutions ensure that the personnel activity reports reflect an after-the-fact confirmation of effort for individuals working on federal awards. At two institutions, we noted failure to have final technical reports sent to NSF within 90 days of the award's expiration date. We encouraged two institutions to increase their efforts to recruit and retain minority and female faculty and students. Three Most Recent Inspections We assessed compliance and performance based on NSF's awards to PIs in two major chemistry departments and at one ERC. In conducting our reviews, we interviewed university staff members and students and reviewed documents. Inspection at a Midwestern University. In a chemistry department at a midwestern, state university, our inspection was based on 21 awards: 11 research instrumentation awards and 10 awards to support the research of 6 faculty members. We found no major deficiencies. We found that the department's internal control structure was generally satisfactory and complied in all material respects with the award requirements. However, we noted two final project reports were overdue and recommended that this deficiency be corrected. We also recommended that the institution use separate expenditure accounts to ensure that cost sharing is traceable in the official books of account, and that personal activity reports reflect an after-the-fact confirmation of effort. Except for four clarifications on the university's procedures for dealing with misconduct in scholarly research, we found the university adequately complied with applicable regulations on misconduct in science, drug-free workplace, lobbying, and nondiscrimination. We also confirmed that "significant, fundamental research that fully integrates graduate, undergraduate and postdoctoral education" was being conducted under each PI's NSF awards. We concluded that the departmental infrastructure of research facilities and equipment, along with the PIs' cohesive research groups, constituted an environment that maximized productivity under NSF's awards. We recommended that the university develop a written policy on access to, and retention of, data obtained under federal awards, particularly to cover the case of a PI who leaves the university. We observed that the program officers in NSF's chemistry division had an inadequate travel budget for site visits necessary for effective program management, and we recommended reconsideration of the NSF policy to limit program officers' travel funds. Since this inspection took place early in the reporting period, we were able to summarize the institution's response to our recommendations. The University disagreed with some of the recommendations from our financial review, but agreed to strengthen its efforts to ensure compliance with those recommendations that it did agree with. The University acknowledged that its procedures for handling misconduct in scholarly research need to be reviewed and revised. The University intends to produce a formal, written policy about the ownership of data and notebooks, but not within the recommended 90-day period. Inspection at an ERC. We conducted an inspection at one of NSF's 18 engineering research centers, which has received approximately $20 million of funding through cooperative agreements. We found the Center's internal controls and compliance with applicable regulations generally satisfactory. We recommended that the Center establish a procedure to approve costs when they exceed original budgeted amounts, develop procedures to ensure that personnel activity reports reflect an after-the-fact confirmation of effort for individuals working on federal awards, and develop separate expenditure accounts to ensure that cost sharing is traceable in the official books of account and that the books fully support other contributions reported to NSF. We recommended that the College of Engineering consider more formal mechanisms to train graduate students in the ethics of research and become more familiar with relevant University policies. Also, we recommended that the University examine its "Policy and Procedures on Academic Integrity in Research and Publication" to ensure that its procedures are consistent with the NSF regulation on Misconduct in Science and Engineering. We recommended that NSF clarify for faculty affiliated with NSF Centers its policy regarding their right to submit individual grant proposals and that it consider measures to emphasize to proposal reviewers the importance of not using for their own benefit the contents of proposals sent to them for review and the importance of not sharing those proposals with their students without NSF's prior agreement. In this same connection, we recommended that the Center emphasize to its faculty the importance of seeking the prior agreement of the NSF program officer before sharing review copies of proposals with their students. We recommended that NSF either enforce or rescind its requirement that publications and invention disclosures resulting from NSF awards be sent promptly to NSF. We recommended that the University address faculty concern for improved assistance in the patenting and commercializing of inventions resulting from research performed at the University. We recommended that the Center develop and publish a policy stating its minimal requirements for the storage and retention of research data. Inspection at a Southeastern University. Our third inspection occurred at a major chemistry department in a southeastern university and was based on 18 awards totaling $3,626,010. These awards consisted of 5 research instrumentation awards and a variety of 13 other research-related awards to 6 PIs. In contrast to several other inspections, we found the university's financial system for handling cost sharing and the personnel activity reporting system to be notably good. The University adequately complied with applicable regulations, disclosure requirements, and restrictions identified as the objectives of our management and administrative review. We did recommend that the University's Policy and Procedures on Ethics in Research be clarified with respect to the standard of evidence, which applies to the University's adjudications of allegations of misconduct in science and how such a standard relates to NSF's standard. We observed that each PI's research is being conducted within a strongly supportive departmental infrastructure and within a cohesive research group and concluded that NSF-supported research was being carried out under conditions that maximized research and education productivity. We did recommend that the University issue a written data access and retention policy. Followup on Previously Reported Inspection of a Plant Biology Department at a Private, Nonprofit Research Institution In Semiannual Report No. 9 (page 32), we reported on our inspection of a Plant Biology Department at a private, nonprofit research foundation where we reviewed performance and compliance under a total of eight NSF grants. We identified weaknesses in the Institution's policies and procedures in the area of charging and controlling costs on federal projects. We were concerned that department staff scientists and laboratory personnel were unaware of the content of the institution's "Policy on the Conduct of Research" and were also unaware of NSF's misconduct in science and engineering regulation. In our view, the Institution's informal knowledge of the location of notebooks developed under NSF awards was not adequate to ensure that the Institution would be able to meet federal requirements for access to records pertinent to a grant. As a result of recommendations made in this report, the Institution agreed to: Review its policy on fringe benefits to determine how to proceed with any rate adjustment. Implement a formal system to track cost sharing. Consider improvements in departmental tracking and reporting of leave, ensure that airline travel on foreign carriers is properly justified, and consider developing an institutionwide procurement policy. The Institution is examining payment approval mechanisms to help strengthen internal controls. The Institution is improving the management of its financial database, which should help prevent spending under expired grants. Distribute a copy of its "Policy on the Conduct of Research" to new employees and discuss the policy with them. Issue a Policy on Maintenance and Accessibility of Research Data. In addition, NSF's Directorate for Biological Sciences, which awarded the grants in our inspection: re-evaluated its policy of prohibiting simultaneous reviews of research proposals submitted to NSF and other federal agencies; determined that, despite objections to this policy by some investigators, the policy was effective in clarifying the focus of the Foundation's role in federal support for biological research; and stated that it was the Directorate for Biological Science's view that the policy has not been in place long enough to allow a clear evaluation of its overall effects, either positive or negative, and that the policy should remain in place for the duration of the 3-year experiment. EVALUATION OF INTERNAL NSF OPERATIONS In addition to conducting inspections at organizations that receive NSF funding, we periodically evaluate internal NSF operations and make recommendations to improve the economy and efficiency of NSF's management of its programs. In this reporting period, we conducted a thorough review of the SBIR program as an extension of findings we developed through our investigations. In addition, in this reporting period, NSF took steps to implement several recommendations from program evaluations that we previously conducted. The actions taken by NSF concerning these program evaluations are described below. Follow-Up on Cost Sharing As described in Semiannual Report No. 8 (page 31), we conducted a review of the adequacy of the rules and procedures that NSF applies to cost sharing by NSF grantees. Some grantees failed to ensure that they met the level of cost sharing promised, and some grantees failed to maintain adequate records on cost sharing. We recommended that NSF make cost-sharing requirements more explicit. In this reporting period, NSF: began developing language to revise the Proposal and Award manual to require that program staff consider cost sharing when reviewing proposed program announcements, revised the Grant Proposal Guide to clarify cost-sharing requirements and ensure that they are clearly specified in the proposal budget, revised the Grant General Conditions to clarify cost- sharing requirements for awards with cost sharing in excess of the 1-percent minimum, and required that grantees who have committed to large amounts of cost sharing certify annually the amounts of costs shared. NSFNET In Semiannual Report No. 8 (page 27), we discussed our review of the NSFNET program. NSFNET, NSF's national computer network, provides the backbone of the National Research and Education Network program. This network is a state-of-the-art, high-speed information superhighway and is an important part of the President's initiative to promote technological development in the United States. NSFNET interconnects the NSF supercomputer centers with regional, government, and international networks, thus enabling researchers, educators, and students to communicate with each other electronically. Although we were generally impressed with the program, we made a number of recommendations to correct deficiencies and strengthen the program as a whole. During this reporting period, NSF incorporated the acceptable use policy into the current award, thereby enhancing the agency's ability to ensure that commercial use of NSFNET does not impair use of the network for research and education activities. NSF has also authorized awards for a new architecture including a very high-speed Backbone Network Service, and extended the current award for 18 months to provide for a smooth transition to the next step in the evolution of NSFNET. NSF has committed to implementing additional recommendations in the future. Enhancement of NSF Computer Database Software to Facilitate Checking for Debarred Principal Investigators In Semiannual Report No. 5 (page 38), we reported that, in response to our recommendation, NSF had begun manually checking every new PI against the debarment list published by GSA. This system will ensure that NSF does not actually award any grants to a PI who is debarred, but it would not enable NSF to avoid the wasted effort of processing and evaluating proposals from such individuals. In discussions with NSF staff at that time, we also suggested that NSF modify the computer software used with its database of individuals who had been listed as PIs on NSF proposals, so that PIs who had been suspended or debarred will be "flagged" in such a way that NSF can avoid processing their proposals. The database software is now being revised to include a flag feature; however, there are still problems in the program that prevent its use at this time. NSF is working with the developer of the software to ensure that the flag will alert staff before proposal processing begins. LEGAL OIG attorneys provide legal advice on all OIG activities, including investigations, audits, and oversight of NSF's functions and programs. OIG attorneys supported many of the activities that are described in other sections of this report. Under section 4(A)(2) of the Inspector General Act, OIG is required to review and make recommendations concerning legislation and regulations that affect NSF and NSF-funded activities. OIG attorneys are responsible for conducting these reviews, as well as general oversight of NSF's legal activities. Article on Investigating Misconduct in Science An article written by OIG legal and scientific staff and NSF's former general counsel, entitled, "Investigating Misconduct in Science: The National Science Foundation Model, was published in the May/June issue of The Journal of Higher Education." The article presents the foundation for NSF's misconduct procedures, which are derived from traditional American methods of investigation and adjudication that were developed for other kinds of cases where individuals are accused of serious wrongdoing. NSF adapted this approach to misconduct cases using an appropriate blend of scientific, investigative, and legal expertise. An important aspect of NSF's approach is that the investigation is kept separate from the adjudication, with scientists leading both processes. When these traditional procedures are applied in the scientific context, they help protect the rights of involved parties and to resolve cases efficiently, confidentially, and fairly. The article compares NSF's methods with other commonly used methods of handling misconduct in science, which often rely on the use of panels of scientists that both investigate and adjudicate. These panels meet, gather information by interviewing witnesses and considering other evidence, and reach a conclusion as to whether the subject was guilty of misconduct. Institutions may be inclined to use panels because they are familiar with this approach in the peer review of grant proposals and the assessment of tenure qualifications. However, when the proceedings can lead to sanctions, the merging of investigative and adjudicatory functions impairs the efficiency and fairness of both functions. If due process protections, such as the right to cross-examine witnesses, are introduced at the investigative stage, efficiency suffers. But, if they are denied during proceedings that determine whether misconduct occurred, the accused scientist may feel that he has not had a fair chance to defend himself. Moreover, the assembly of a panel and the questioning of witnesses increases the chance for a breach of confidentiality. This is particularly unfair during the investigation, when there is not yetþand may never beþa finding of misconduct. By contrast, when NSF applies the traditional American investigatory model, it employs mechanisms designed to promote efficiency, confidentiality, and fairness. In NSF's OIG, misconduct investigations that are not deferred to awardee institutions are carried out by scientists or engineers heading an interdisciplinary team that includes lawyers and specially trained investigators. An OIG investigatory team has the flexibility to question witnesses at separate times and places, as confidentiality, efficiency, and the proximity of evidence dictate. The investigation conducted by an OIG team is nonadversarial in that it is designed to elicit information, rather than reach a conclusion as to whether misconduct was committed. OIG's investigation report only states whether there is a convincing case for misconduct. It does not make a final determination of misconduct on behalf of NSF. An NSF determination of misconduct takes place in an adjudication by NSF's Deputy Director, who considers the report's recommendations and decides whether misconduct has occurred and whether to impose sanctions. It is at this stage, when the possibility of sanctions is considered, that the accused scientist receives all due process protections. The subject is entitled to submit evidence, call and confront witnesses, and be represented by counsel. Thus, the overall NSF procedure is fair to the scientist without hampering the evidence-gathering process and with reduced risk to confidentiality. Moreover, NSF's procedures promote fairness in another way. NSF assigns the investigation to one set of people and the adjudication to another. This separation of functions, by vesting responsibility for different phases of a case in different individuals, provides checks and balances analogous to the separation of powers in government. Independent assessment by scientific peers at both the investigation and adjudication phases allow two evaluations of what constitutes misconduct and ensures that the bounds of misconduct in science are only as broad as the scientific community generally accepts. Many universities and other federal agencies are reconsidering the procedures they use in handling misconduct in science cases. The article suggests that they consider adopting procedures based on established methods of investigation and adjudication. If the traditional American model of investigation is applied effectively, misconduct in science cases can be resolved fairly and accurately, in a timely fashion, and without great expense. OTHER LEGAL ISSUES Access to Grant Records. The NSF Grant General Conditions state that grantees are responsible for the work conducted under their grants; require that grantees provide annual progress reports and a final report of the work performed under their grants; require that grantees retain all records pertinent to their grants for 3 years after work on the grant is complete; and require that grantees provide NSF access to all the grantees' pertinent records. We recommended that NSF ensure that it continues to have clear access to all grant records under the current Grant General Conditions. If NSF concludes that there are any ambiguities in NSF's right of access to pertinent records, we recommended that NSF act promptly to ensure that it has such access. NSF's Director accepted both recommendations. Public Identification by HHS of Individuals Found to have Committed Misconduct in Science. As discussed in Semiannual Report No. 9 (page 38), the Department of Health and Human Services (HHS) began publicly disseminating the identities of persons that it found had committed misconduct in science in June 1993. We mentioned two issues for NSF that arose from HHS's action. (1) What, if anything, should NSF do if an individual who applies to NSF for an award has been found by HHS to have committed misconduct in science but against whom HHS did not apply a governmentwide sanction? and (2) Should NSF actively disseminate the identities of individuals that NSF finds to have committed misconduct in science? In this reporting period, NSF's Director consulted with NSF's OGC concerning these issues, but the Director has not yet responded to our queries. Integrity of Peer Review. In Semiannual Report No. 9 (page 39), we discussed our determination that the information provided to peer reviewers was insufficient to convey the importance of NSF's policy on the confidentiality of peer review. We recommended that NSF ensure that all reviewers are more clearly informed, in writing, of all of the requirements of its policy regarding the integrity of the confidential peer review process and inform reviewers of the possible consequences of violating that policy. In this reporting period, NSF stated generally that it shares our concerns and will take steps to address them, but it has not yet specified what actions it will take. STATUTORY AND REGULATORY ISSUES Guidance Requested From the General Accounting Office on Use of Appropriated Funds to Support Annual Awards Dinner. In 1976, Congress directed NSF to establish an award to honor young scientists whose work has shown exceptional promise. Traditionally, the NSB has honored the recipients of this, and other NSF awards, at a dinner that is held each May. In many years, NSF has used appropriated funds to cover some of the expenses associated with this dinner. In 1993, we reviewed the accounts that support expenditures for the awards dinner (see Semiannual Report No. 8, page 10). As a result of that review, we recommended that NSF either seek specific authority from Congress to use appropriated funds to pay for the dinner or obtain an opinion from the Comptroller General on whether the use of appropriated funds for this dinner is permissible. In January 1994, NSF's Acting General Counsel wrote to the Comptroller General requesting approval for the use of appropriated funds for this purpose. The Inspector General also wrote to the Comptroller General providing factual information about the use of appropriated funds for past dinners and requesting detailed guidance on the permissible use of appropriated funds for several categories of dinner expenses. As of March 1994, NSF had not received detailed, written guidance on this issue from the General Accounting Office. Agency Systems of Records. In Semiannual Report No. 9 (page 41), we discussed two Privacy Act systems of records maintained by NSF for which the appropriate notice had not been published in the Federal Register pursuant to the Act's requirements. We recommended that NSF publish the appropriate notices for these systems. In this reporting period, both notices were formally published in the Federal Register. Program Fraud Civil Remedies Act. In our second and fourth semiannual reports (pages 24 and 42), we explained that NSF is not covered by the Program Fraud Civil Remedies Act because the Act authorizes only a government "authority" to bring an action, and "designated federal entities," such as NSF are not included in the Act's definition of "authority." We recommended that Congress amend the Act to enable NSF to use its provisions. In subsequent semiannual reports, we discussed a draft amendment to the Act that would include NSF as an "authority," which NSF had drafted and which had been cleared by OMB. In this reporting period, NSF forwarded the proposed amendment to Congress, and we are hopeful that it will be attached to suitable legislation. Touhy Regulation. In Semiannual Report No. 9 (page 41), we discussed our recommendation that NSF adopt a regulation to establish procedures for NSF's response to subpoenas or other demands for current and former NSF employees to testify about, or produce records concerning, NSF matters in the course of private litigation or other proceedings to which the federal government is not a party. The regulation would prevent current and former NSF employees from complying with such demands without the permission of the Director or the Director's delegate (or, in the case of OIG employees, the Inspector General or the Inspector General's delegate). NSF is currently considering a draft of this regulation. CONFLICTS ISSUES Progress on Financial Disclosure Policy for PIs In Semiannual Report No. 8 (page 33), we discussed a revised system for identifying potential conflicts of interest on the part of PIs who apply for NSF grants. The revised policy would require that investigators' financial interests be disclosed to universities rather than NSF, provided the PI certified on each proposal that all financial interests had been disclosed to the university and that the university certified that the disclosed financial interest had been reviewed and any conflicts of interest resolved. In Semiannual Report No. 9 (page 41), we reported that this rule had been forwarded to OMB and the Office of Science and Technology Policy for comment and clearance, and that OMB and the Office of Science and Technology Policy were working with NSF and the National Institutes of Health, which had been developing its own policy on investigator conflicts to establish consistent policies. In this reporting period, NSF and the National Institutes of Health made considerable progress in developing consistent policies, and we expect the few remaining differences to be resolved soon. Progress on NSF's Supplemental Conflict-of-Interest Rules In Semiannual Report No. 5 (page 38), we discussed our concern that the Office of Government Ethics' (OGE) new uniform standards of ethical conduct for executive branch employees might supersede certain of NSF's standards that were well-tailored to NSF. For example, many NSF program officers work at NSF only 1 or 2 years while on leave from permanent teaching and research positions at their universities; the OGE standards would supersede NSF's "1-year rule," which prohibits NSF employees from representing themselves or others before NSF for a 1-year period after they leave NSF. Since the OGE standards were finalized in 1992, NSF has been working with OGE to craft a supplemental regulation that will continue these appropriate NSF-only requirements. We are encouraged with the progress that has been made and are hopeful that the supplemental NSF regulation will be promulgated soon. SIGNIFICANT AUDIT RECOMMENDATIONS FROM PREVIOUS SEMIANNUAL REPORTS We are responsible for reporting to Congress and following up on the resolution of audit recommendations. From October 1, 1993, through March 31, 1994, we have resolved 10 reports with significant audit recommendations. These reports were noted in Semiannual Report Nos. 8 and 9. SBIR Grantee Claims Excess Indirect Costs Period First Reported: October 1, 1992 - March 31, 1993 NSF awarded a $230,306 grant to an organization to support a process of growing crystal fibers. We questioned $21,200 because claimed indirect costs exceeded allowable indirect costs, claimed costs exceeded recorded costs, and a grant charge was made without a supporting invoice. CPO finalized the indirect cost rates for the award period and disallowed $8,688 of the questioned costs. CPO required that the grantee adjust its records. Association Lacks Adequate Records Period First Reported: October 1, 1992 - March 31, 1993 NSF awarded an education association seven grants, totaling $1,585,701, to create instructional programs for math teachers. We questioned $180,449 because salaries and fringe benefits were not supported by time and attendance records; consulting charges were not supported by written agreements or invoices for services rendered; source documentation was not maintained for direct costs; and the rates used to claim indirect costs exceeded final indirect costs rates. We recommended that the grantee require that written consulting agreements be submitted to support consulting charges. CPO requested that NSF's program office review the project's accomplishments to determine whether the value was received for the undocumented expenditures. The program office determined that value was received for approximately $135,000 of the questioned costs, and CPO disallowed $45,192. Unclaimed expenditures of $30,000 were used to offset the disallowed costs, and the grantee paid $15,192. Nonprofit's Accounting System was Inadequate Period First Reported: October 1, 1992 - March 31,1993 NSF awarded two grants, totaling $150,000, to a nonprofit organization to support publication of annual directories of scientific training programs. We questioned $4,070. Both NSF grants had been charged to the same account. As a result, we could not identify which costs were applicable to each award, reconcile the amount reported on the Federal Cash Transactions Report with the account ledgers, or determine the exact amount of income applicable to each award. We recommended that the grantee account for the costs by grant, establish records that compare budgeted amounts for the grants with the amounts actually spent, and support payroll expenses with personnel activity reports or an alternative system. The entire $4,070 was disallowed. CPO conducted a site visit and found that significant self-funded expenditures could be used to offset the disallowed costs. Nonprofit Organization has Questioned Costs Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded a $407,206 grant to a nonprofit organization to develop and implement a curriculum and professional development model to upgrade the Cleveland public schools' seventh and eighth grade mathematics curriculums. The grantee claimed $358,617, and we questioned $197,293. We recommended that the grantee develop accounting policies and procedures and develop controls within its financial management system. During the resolution process, $6,354 of the questioned costs were disallowed with the remaining costs accepted after the program office determined that the expenditures were in line with the accomplishments under the project. Small Business Innovation Research Company Claims Unauthorized and Excessive Costs Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded a $224,137 grant to a for-profit organization to support the research and development of a set of statistical procedures. The grantee claimed $224,137, and we questioned $11,288. The questioned costs resulted from unapproved salaries charged to the award, unauthorized travel expenses, and salaries paid that exceeded the allowable rate. NSF's program office determined that the salaries and travel costs were appropriate for the activity supported. Based on that determination, no costs were disallowed. For-Profit Corporation Fails to Support Claimed Costs Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded a $248,239 grant to a for-profit corporation to fund research in fruit maturation and ripening. The grantee claimed $83,122, and we questioned $44,932. Questioned costs related to unsupported salary and fringe-benefit costs, the purchase of equipment that was not a budget line item, and indirect costs claimed that exceeded the allowable amount. The grantee provided documentation to support all but $10,394 of the questioned costs. These unsupported costs were disallowed. Not-For-Profit Does Not Remit Interest Earned on Advance Funds Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded five grants, totaling $309,576, to a not-for-profit organization to support research facilities and programs. The grantee claimed $309,104, and we questioned $15,495. Questioned costs resulted from insufficient documentation to support costs claimed, unallowable costs, and interest earned on advance funds that were not remitted to the government. We also found that final progress reports were not promptly submitted to NSF. Accounting functions were not segregated, and procedures for awarding contracts totaling $10,000 or more were not maintained. NSF disallowed $8,494 of the questioned costs, of which $5,498 was offset against unclaimed costs, and the grantee will pay the government the remaining $2,996. Commercial Company has Significant Amounts of Unsupported Costs Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded a $450,780 grant to a commercial company to support production of the first "IMAX" film to survey the universe. The grantee claimed $88,459, and we questioned $80,591. Questioned costs related to salary expenses that were not supported by time/attendance or activity reports and unsupported subcontract costs. The grantee provided information on which NSF's program office based a determination that accomplishments were worth $50,000 of the questioned costs. The remaining $30,000 was accepted when the grantee showed that although "a less than arms length" transaction occurred, the service was provided at a lower cost than would have been provided by three independent proposals. Nonprofit Organization Claimed Unsupported Costs Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded a $392,820 grant to a nonprofit organization to support the production of an educational film. The organization claimed $186,490, and we questioned $55,319. Consulting costs were not supported by written agreements, and inadequate invoices and labor costs were mistakenly charged to the grant. Cash advances were not deposited into an interest-bearing account, and documentation was not maintained to show how exchange rates were used to translate foreign expenditures. NSF disallowed $11,115 of the questioned costs. The remaining costs were accepted based on a determination by the program office that services had been received and the costs were necessary. University Indirect Cost Rates Reviewed Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded an $18 million, 5-year contract with the University of Alaska, Fairbanks, to operate the Polar Ice Coring Office (PICO). PICO plans and organizes ice core drilling projects in the world's polar and high-altitude regions. The University and NSF established a rate to more accurately allocate indirect costs to the PICO contract. This rate was different than the rate negotiated by the cognizant federal agency, the Office of Naval Research. We reviewed both indirect cost rates to determine which rate was more equitable to NSF. We estimated that if the University receives the follow-on contract with the current indirect cost rate, $687,500 in excess indirect costs will be charged to the new contract. As a result of our recommendation to eliminate the excess indirect costs, the University submitted a revised indirect cost proposal. The contracting officer accepted the newly proposed rate for contract negotiations. Then, ONR provided a separate rate for the PICO resulting in savings of over $463,000 over the life of the contract. REPORTS WITH OUTSTANDING MANAGEMENT DECISIONS This section identifies audit recommendations described in previous semiannual reports where corrective action has not been completed by management. CPO is tasked with making management's decision concerning external audit reports. During this reporting period, CPO resolved 28 reports that were described in previous semiannual reports. ****************************************************************** Management Decision: Management's evaluation of audit findings and recommendations and issuance of a final decision concerning management's response to such findings and recommendations. ****************************************************************** Report Date Report Number Title Issued Reports with questioned costs: 91-1038 Prism Productions 12/21/90 93-1050 Museum of Science and Industry 06/08/93 93-1054 Society of Hispanic Professional Engineering Foundation 08/17/93 93-1058 Maurer Engineering,Inc. 09/29/93 93-1060 Antarctic Support Associates 09/30/93 93-1061 Vanderbilt University 09/30/93 93-1065 Catholic University of America 09/30/93 93-1066 American University 09/30/93 93-1067 Cerro Tololo Inter-American Observatory 09/30/93 Commercial Firm Earns Interest on NSF Funds Period First Reported: October 1, 1990 - March 31, 1991 NSF awarded two grants totaling $2,225,496 to a privately owned, for-profit corporation that provides technical and scientific information to commercial television stations. The corporation claimed $2,113,620, and we questioned $410,338. The questioned costs resulted from unsupported salary costs being charged to the grant, invoices supporting expenditures not being available, and indirect costs being charged at a rate higher than the actual or maximum provisional rate. We recommended an additional $21,175 of interest earned on NSF advances be returned to NSF. During this reporting period, NSF received an offer from the company to settle the questioned costs for approximately $83,000. NSF made an offer which the grantee has rejected. At the end of the reporting period, NSF was determining its next action. Museum of Science and Industry Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded over $1.3 million to a not-for-profit museum to support construction of a new exhibit. The award was made with the expectation that the grantee would cost share approximately $3.7 million of the project's total costs. We found that there was a significant gap between the funding received and the funding the project needed. The grantee claimed $150,777 against the NSF award, and we questioned $29,389. We also found that excessive indirect costs were provided under the award. We recommended that the museum conduct an audit in accordance with federal guidelines, ensure that cash on-hand not exceed the project's operating needs, and establish records that compare budgeted amounts with actual outlays. The grantee responded to the NSF questioned cost letter, but firmly disagreed with the proposed handling of the questioned costs in the indirect cost pool. Resolution is pending negotiations of final indirect cost rates. Professional Foundation Lacks Documentation Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded two grants, totaling $312,612, to a nonprofit corporation to support the development and enhancement of the mathematic and scientific skills of precollege Hispanic students. We questioned $33,596 because salaries, materials, and supplies were not supported by adequate documentation, and claimed costs exceeded recorded costs. We also found that the grantee did not maintain an approved indirect cost allocation plan. NSF has offered to resolve the questioned costs based on information provided by the grantee. The grantee must present this offer to its board of directors before resolution can occur. Resolution is expected during the next reporting period. SBIR Grantee Claims Excess Indirect Costs Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded a $224,107 grant to an engineering company to support the study of special drilling equipment for unusually deep earth coring applications. We questioned $1,149 because claimed indirect costs exceeded allowable amounts in the grant agreement. An additional $35,677 of claimed indirect costs were classified as suspended costs pending receipt and acceptance by NSF of indirect cost rate data from the grantee. These issues will be resolved when final indirect cost rates for the 2 years covered by the audit are available. Resolution is expected to be complete before September 30, 1994. Antarctic Program Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded a 6.5-year cost-plus-award-fee contract to Antarctic Support Associates (ASA) to fund research activities and operations as well as to maintain facilities and equipment at sites in Antarctica. ASA claimed expenditures of approximately $169 million. We questioned $652,352 because inadequate, and in some cases no, documentation was provided to support claimed costs related to equipment, travel, and other services; reimbursement for travel in personal automobiles was not always justified; documentation was not maintained that justified the use of foreign-flag air carriers; and payment made by ASA for services rendered by its two parent companies was not supported by adequate documentation or a contractual agreement to be used to determine reasonableness of the billed costs. We also noted the following compliance and internal control deficiencies: NSF was not notified before changes totaling $148,000 were made on a subcontract; formal policies and procedures related to the use of foreign-flag air carriers and cash draw downs were not developed; and appropriate approval was not obtained to change the level of liability insurance. The contractor has provided NSF with extensive documentation as a result of NSF's resolution activities. That documentation is under review, we expect to resolve these issues before September 30, 1994. Vanderbilt University Period First Reported: April 1, 1993 - September 30, 1993 NSF's Division of Physics awarded Vanderbilt University five grants, totaling $2,028,300. The University claimed $1,933,467, and we questioned $82,507. Questioned costs resulted from personnel activity reports that were incomplete; costs that were incurred before the effective dates of the preaward periods; travel costs were not supported; and indirect costs that were incorrectly charged against equipment. Our review of internal controls and compliance issues disclosed that cost and price analyses were not always documented, property records were incomplete, and a system was not maintained to monitor cost sharing. NSF is reviewing the university's response to the questioned costs. Resolution is expected during the next reporting period. Catholic University Period First Reported: April 1, 1993 - September 30, 1993 NSF's Division of Physics awarded Catholic University four grants, totaling over $1.6 million. The University claimed $1,499,353, and we questioned $41,244 because salaries were not supported by personnel activity reports; expenditures were not supported by documentation; tuition was charged when graduate students were not working on the awards; and indirect costs were incorrectly charged against equipment and tuition. Our review of internal controls and compliance issues disclosed that equipment was not tagged, physical inventories were not performed, and a system was not maintained to monitor cost sharing. The university has provided its response to NSF. The report is expected to be resolved within the next reporting period. American University Period First Reported: April 1, 1993 - September 30, 1993 NSF's Division of Physics awarded American University four grants, totaling $2,629,736. The University claimed $2,037,474, and we questioned $543,755 because salaries, wages, and tuition costs were not supported by personnel activity reports and participant support costs were not tracked in the University's accounting system. Our review of internal controls and compliance issues disclosed that there was no written documentation to support price and cost analyses, including competition for purchases of $10,000 or more, or sole source vendor selection. NSF is reviewing the university's response to its proposed resolution. A portion of the response was provided to NSF's program office for review and evaluation. The audit is expected to be resolved during the next reporting period. Cerro Tololo Inter-American Observatory Period First Reported: April 1, 1993 - September 30, 1993 NSF awarded a 5-year, $158,543,300 cooperative agreement to the Association of Universities for Research in Astronomy (AURA), in support of the National Optical Astronomy Observatories. The Cerro Tololo Inter-American Observatory (CTIO), located in La Serena, Chile, is one of three observing sites that make up the National Optical Astronomy Observatories. We reviewed CTIO operations and about $3.7 million in costs claimed under the cooperative agreement. We found questionable costs and made recommendations to decrease operational costs and improve the administrative support of CTIO, which would result in a saving of $48,000 to NSF. These savings would result from more accurate revenue forecasts, and the allocation of indirect costs to an automobile rental business operated by the contractor on CTIO's facilities. Other recommendations included lowering the $257,000 average balance of NSF cash held in the contractor's Chilean bank account, seeking more competition, and reconciling property and financial records. The NSF resolution official has conducted a site visit and held discussions with the AURA management. Further discussions with AURA and OIG are expected with resolution anticipated during the third quarter of calendar year 1994. Agency Refusal To Provide Information Or Assistance During this reporting period, there were no reports made to the National Science Board of instances where information or assistance, requested under section 5(a)(5) of the Inspector General Act of 1978, as amended, was unreasonably refused or not provided. Significant Management Decisions That Were Revised No significant management decisions were revised during the reporting period. Inspector General's Disagreement With Significant Management Decisions The Inspector General has no disagreement with significant management decisions made during this reporting period. LIST OF REPORTS We issued the following audit reports and, where applicable, the total dollar value of questioned costs (including a separate category for the dollar value of unsupported costs) is listed for each report. NSF and CPA Performed Audits Date Report Questioned Unsupported Number Grantee Issued Costs Costs 94-1001 Center for American Archeology 11/02/93 9,155 134 94-1002 Top-Vu Technology, Inc. 11/04/93 41,427 41,339 94-1003 Microfab Technologies, Inc. 11/04/93 14,695 0 94-1004 Council State Science Supervisors 11/19/93 98,308 97,013 94-1005 Good Samaritan Hospital & Medical Center 12/01/93 8,562 8,562 94-1006 Energy Concepts Company 01/10/94 56,770 0 94-1007 McLean Hospital 01/10/94 5,630 0 94-1008 Air New Zealand 01/26/94 522,871 0 94-1009 Network Dynamics Inc. 02/01/94 15,596 0 94-1010 Engineering Data Management, Inc. 02/05/94 45,081 1,719 94-1011 Acadia Institute 02/05/94 4,028 2,705 94-1012 Rhode Island Hospital 02/05/94 1,831 1,483 94-1013 Friends of Fermilab Association 02/10/94 61,391 0 94-1014 Science Research Lab, Inc. 02/18/94 0 0 94-1015 Advanced Surface Technology, Inc. 02/18/94 9,826 0 94-1016 ENZON, Inc. 02/18/94 0 0 94-1017 American Express Travel Related Services 03/14/94 48,787 34,508 94-1018 Maine Mathematics and Science Alliance 03/14/94 45,010 0 94-1019 DRACO Technologies 03/14/94 52,976 52,976 94-1020 NY State Education Department 03/14/94 71,612 0 94-1021 Life Lab Science Program, Inc. 03/23/94 35,670 0 94-1022 Joel Popkin & Co. 03/23/94 22,193 15,620 94-1023 Optoelectronic Computing Systems Center -- Univ. of Colorado 03/31/94 0 0 94-1024 The Museum Film Network 03/31/94 112,324 15,214 INTERNAL AUDITS Date Report Questioned Unsupported Number Grantee Issued Costs Costs 94-2101 Chief Financial Officer Act Audit 02/25/94 0 0 94-2102 Review of Contracted Advisory & Assistance Services 03/14/94 0 0 94-2103 Review of NSF's Electronic Time and Attendance System 03/14/94 0 0 94-2104 Ocean Drilling Project - Financial Statements Audit 03/30/94 0 0 94-2105 International Phase of Ocean Drilling Project - Financial Statement Audit 03/30/94 0 0 94-2106 American Express 03/31/94 0 0 94-2107 Public Transportation Subsidy Program 03/31/94 0 0 94-2108 Review of Lobbying Restrictions 03/31/94 0 0 NSF COGNIZANT AUDITS Date Report Questioned Unsupported Number Grantee Issued Costs Costs 94-4001 American Statistical Association 10/21/93 0 0 94-4002 Biological Sciences Curriculum Study 11/15/93 0 0 94-4003 Center for American Archeology 11/15/93 0 0 94-4004 National Bureau of Economic Research 11/19/93 0 0 94-4005 PATHS/PRISM 12/01/93 0 0 94-4006 Illinois State Museum Society 12/01/93 0 0 94-4007 Monterey Bay Aquarium Research Institute (MBARI) 12/01/93 0 0 94-4008 Sea Education Association 12/01/93 0 0 94-4009 Discovery Place, Inc. (NC) 02/01/94 0 0 94-4010 National Action Council for Minorities in Engineering (NACME) 02/01/94 0 0 94-4011 Law & Society Association ('92) 02/01/94 0 0 94-4012 Marie Selby Botanical Gardens 02/01/94 0 0 94-4013 Law & Society Association ('93) 02/05/94 0 0 94-4014 Exploratorium 02/18/94 0 0 94-4015 San Diego Society for Natural History 02/18/94 0 0 94-4016 Maine Audubon Society 02/18/94 0 0 94-4017 The Bakken 02/18/94 0 0 94-4018 American Museum of Natural History 02/10/94 111,413 111,413 94-4019 Santa Barbara Museum of Natural History 02/18/94 0 0 94-4020 Houston Museum of Natural History 02/18/94 0 0 94-4021 American Political Science Association 02/22/94 0 0 94-4022 Massachusetts Microelectronics Center 02/22/94 0 0 94-4023 National Council of Teachers of Math 02/22/94 23,984 23,984 94-4024 Association of Universities for Research in Astronomy (AURA) 02/22/94 0 0 94-4025 Education and Resources Group 02/22/94 0 0 94-4026 Technical Education Research Center 02/22/94 0 0 94-4027 Student Pugwash USA 03/14/94 0 0 94-4028 Brookings Institution 03/14/94 0 0 94-4029 Minnesota Private College Research Foundation 03/14/94 0 0 94-4030 California Universities for Research in Earthquake Engineering 03/14/94 0 0 94-4031 Marine Science Consortium ('91) 03/14/94 0 0 94-4032 Marine Science Consortium ('92) 03/14/94 0 0 94-4033 Society for the History of Technology 03/14/94 0 0 94-4034 American Geological Institute 03/14/94 0 0 94-4035 Corporation for National Research Initiatives 03/14/94 0 0 94-4036 American Indian Science & Engineering Society 03/14/94 0 0 94-4037 American Geophysical Union 03/14/94 0 0 94-4038 American Society of Mechanical Engineers 03/14/94 0 0 94-4039 Paths/Prisms 03/14/94 0 0 94-4040 Nebraska Independent College Foundation 03/14/94 0 0 94-4041 MSRI-Mathematical Sciences Research Institution 03/14/94 0 0 94-4042 American Association of Community and Junior Colleges 03/14/94 0 0 94-4043 American Bar Foundation 03/14/94 0 0 94-4044 Association of Science- Technology Centers 03/15/94 781 781 94-4045 Joint Oceanographic Institution 03/15/94 0 0 94-4046 National Association of Biology Teachers 03/15/94 0 0 94-4047 University Corporation for Atmospheric Research (UCAR) 03/15/94 0 0 94-4048 Association of American Geographers 03/15/94 1,689 0 94-4049 Ventures In Education ('93) 03/16/94 0 0 94-4050 Ventures In Education ('92) 03/16/94 0 0 94-4051 Pacific Science Center Foundation 03/21/94 22,950 21,047 OTHER FEDERAL AUDITS Date Report Questioned Unsupported Number Grantee Issued Costs Costs 94-5001 Johns Hopkins University 11/01/93 0 0 94-5002 Michigan Technological University 11/01/93 0 0 94-5003 Pennsylvania State University 11/01/93 0 0 94-5004 California Institute of Technology 11/01/93 0 0 94-5005 Massachusetts Institute of Technology 11/01/93 0 0 94-5006 Stanford University 11/01/93 0 0 94-5007 Stanford University 11/01/93 0 0 94-5008 Stanford University 11/01/93 0 0 94-5009 Stanford University 11/01/93 0 0 94-5010 Stanford University 11/01/93 0 0 94-5011 Stanford University 11/01/93 0 0 94-5012 American Institutes for Research (AIR) 11/01/93 0 0 94-5013 California Institute of Technology 11/01/93 0 0 94-5014 California Institute of Technology 11/01/93 0 0 94-5015 University of Rhode Island 11/01/93 0 0 94-5016 University of Rhode Island 11/01/93 0 0 94-5017 University of Rhode Island 11/01/93 0 0 94-5018 San Francisco State University Foundation 11/01/93 1,748 0 94-5019 Stanford University 11/01/93 0 0 94-5020 State of North Carolina 11/01/93 0 0 94-5021 Loma Linda University 11/01/93 0 0 94-5022 Christian Brothers College 11/01/93 0 0 94-5023 University of Rochester 11/01/93 0 0 94-5024 Pennsylvania State University 11/01/93 2,278 0 94-5025 Wayne State College 11/01/93 0 0 94-5026 SETI Institute 11/01/93 0 0 94-5027 Far West Laboratory for Educational Research and Development 11/01/93 0 0 94-5028 College of St. Scholastica 11/01/93 0 0 94-5029 State of Texas 11/01/93 0 0 94-5030 University of Medicine & Dentistry of New Jersey 11/01/93 0 0 94-5031 University of the South 11/01/93 0 0 94-5032 State of Maryland 11/01/93 0 0 94-5033 Livingston University 11/01/93 0 0 94-5034 Seattle University 11/01/93 0 0 94-5035 Aerodyne Research, Inc. 11/01/93 0 0 94-5036 Boise State University 11/01/93 0 0 94-5037 University of Miami 11/01/93 0 0 94-5038 Rowan-Cabarrus Community College 11/01/93 0 0 94-5039 Loyola Marymount University 11/01/93 0 0 94-5040 Calhoun State Community College 11/01/93 0 0 94-5041 Westmont College 11/01/93 0 0 94-5042 Agnes Scott College 11/01/93 0 0 94-5043 Stanford University 11/01/93 0 0 94-5044 University of Maryland System 11/02/93 0 0 94-5045 Stanford University 11/01/93 0 0 94-5046 Teikyo Marycrest University 11/01/93 0 0 94-5047 Brown University 11/01/93 0 0 94-5048 Pennsylvania State University 11/01/93 1,223 0 94-5049 Computer Sciences Corporation 11/01/93 0 0 94-5050 Computer Sciences Corporation 11/01/93 0 0 94-5051 Polytechnic University 11/01/93 0 0 94-5052 Carroll College 11/01/93 0 0 94-5053 University of Arkansas Medical Sciences 11/01/93 0 0 94-5054 Computer Sciences Corporation 11/01/93 0 0 94-5055 Computer Sciences Corporation 11/01/93 0 0 94-5056 Computer Sciences Corporation 11/01/93 0 0 94-5057 Computer Sciences Corporation 11/01/93 0 0 94-5058 Computer Sciences Corporation 11/01/93 0 0 94-5059 Computer Sciences Corporation 11/01/93 0 0 94-5060 Computer Sciences Corporation 11/01/93 0 0 94-5061 Computer Sciences Corporation 11/01/93 0 0 94-5062 Computer Sciences Corporation 11/01/93 0 0 94-5063 Santa Fe Community College 11/01/93 0 0 94-5064 Temple University 11/01/93 0 0 94-5065 SUNY Research Foundation 11/01/93 0 0 94-5066 Rand Corporation 11/01/93 0 0 94-5067 California Institute of Technology 11/01/93 0 0 94-5068 Beloit College 11/01/93 0 0 94-5069 California State University San Bernardino Foundation 11/01/93 0 0 94-5070 Failure Analysis Associates, Inc. 11/01/93 0 0 94-5071 Wofford College 11/01/93 0 0 94-5072 Foster-Miller Inc. 11/01/93 0 0 94-5073 Stanford University 11/01/93 0 0 94-5074 Miami-Dade Community College 11/01/93 0 0 94-5075 Carnegie Mellon University & Software Engineering Institute 11/01/93 0 0 94-5076 Columbia University 11/01/93 0 0 94-5077 Aerodyne Research, Inc. 11/01/93 0 0 94-5078 Aerodyne Research, Inc. 11/01/93 0 0 94-5079 University of Rhode Island 11/01/93 0 0 94-5080 Pennsylvania State University 11/01/93 0 0 94-5081 Pennsylvania State University 11/01/93 0 0 94-5082 Cornell College 11/01/93 0 0 94-5083 Northmont City School District 07/14/93 0 0 94-5084 Westinghouse Electric Corporation Science & Technology Center 11/01/93 0 0 94-5085 University of Notre Dame 11/01/93 0 0 94-5086 New Mexico State University 11/01/93 0 0 94-5087 Computer Sciences Corporation 11/01/93 0 0 94-5088 Atom Sciences, Inc. 11/01/93 0 0 94-5089 Smithsonian Institution 11/03/93 0 0 94-5090 Computer Sciences Corporation 11/03/93 0 0 94-5091 Computer Sciences Corporation 11/03/93 0 0 94-5092 Computer Sciences Corporation 11/03/93 0 0 94-5093 Materials Research Society 11/03/93 0 0 94-5094 General Electric Company Corporate R & D Center 11/03/93 0 0 94-5095 Bend Research, Inc. 11/03/93 0 0 94-5096 Materials and Electrochemical Research Corporation 11/03/93 0 0 94-5097 Southwestern University 11/03/93 0 0 94-5098 University of Rhode Island 11/03/93 0 0 94-5099 Bishop Museum 11/03/93 15,310 15,310 94-5100 State of Tennessee 11/03/93 0 0 94-5101 City of Boston 11/04/93 0 0 94-5102 Commonwealth of Virginia ('92) 11/04/93 0 0 94-5103 Commonwealth of Virginia ('91) 11/04/93 0 0 94-5104 Woods Hole Oceanographic Institution 11/04/93 0 0 94-5105 Woods Hole Oceanographic Institution 11/04/93 0 0 94-5106 Charles Stark Draper Laboratory, Inc. 11/04/93 0 0 94-5107 Charles Stark Draper Laboratory, Inc. 11/04/93 0 0 94-5108 Charles Stark Draper Laboratory, Inc. 11/04/93 0 0 94-5109 National Urban League 11/04/93 0 0 94-5110 Saint Mary's College 11/04/93 0 0 94-5111 Cuyahoga Community College 11/04/93 0 0 94-5112 University of Notre Dame 11/04/93 0 0 94-5113 New Mexico State University 11/04/93 0 0 94-5114 New Mexico State University 11/04/93 0 0 94-5115 New Mexico Institute of Mining and Technology 11/04/93 0 0 94-5116 New Mexico Institute of Mining and Technology 11/04/93 0 0 94-5117 New Mexico State University 11/04/93 0 0 94-5118 Institute for Technology Development 11/04/93 0 0 94-5119 Institute for Technology Development 11/04/93 0 0 94-5120 Institute for Technology Development 11/04/93 0 0 94-5121 Institute for Technology Development 11/04/93 0 0 94-5122 Ohio Wesleyan University 11/04/93 0 0 94-5123 Earlham College 11/04/93 0 0 94-5124 Brigham & Women's Hospital, Inc. 11/04/93 0 0 94-5125 Associated Colleges of the Midwest 11/04/93 0 0 94-5126 Francis Marion College 11/04/93 0 0 94-5127 Florida Institute of Technology 11/04/93 0 0 94-5128 Coe College 11/04/93 0 0 94-5129 State of South Dakota 11/04/93 0 0 94-5130 Smithsonian Institution 11/04/93 0 0 94-5131 Smithsonian Institution 11/04/93 0 0 94-5132 Woods Hole Research Center 11/04/93 0 0 94-5133 Southern Growth Policies Board 11/04/93 0 0 94-5134 University of Hawaii 11/04/93 0 0 94-5135 Massachusetts Institute of Technology 11/04/93 0 0 94-5136 Massachusetts Institute of Technology 11/04/93 0 0 94-5137 Massachusetts Institute of Technology 11/04/93 0 0 94-5138 Massachusetts Institute of Technology 11/04/93 0 0 94-5139 General Electric Research & Development Center 11/04/93 0 0 94-5140 Kestrel Institute 11/04/93 6,500 6,500 94-5141 Kestrel Institute 11/04/93 8,493 8,493 94-5142 Kestrel Institute 11/04/93 577 577 94-5143 Grand Valley State University 11/04/93 0 0 94-5144 Computer Sciences Corporation 11/04/93 0 0 94-5145 Bank Street College of Education 11/04/93 0 0 94-5146 College of Notre Dame of Maryland 11/05/93 2,172 2,172 94-5147 University of Vermont 11/05/93 0 0 94-5148 Reed College 11/05/93 0 0 94-5149 University of San Diego 11/08/93 0 0 94-5150 Saint Michael's College 11/10/93 0 0 94-5151 Elizabethtown College 11/08/93 6,813 6,813 94-5152 College of the Holy Cross 11/08/93 0 0 94-5153 Claremont University Center 11/08/93 0 0 94-5154 Spelman College 11/08/93 0 0 94-5155 University of the Pacific 11/08/93 0 0 94-5156 Palm Beach Community College 11/08/93 0 0 94-5157 American Psychological Association 11/08/93 0 0 94-5158 Massachusetts Biotechnology Research Institute (MBRI) 11/08/93 0 0 94-5159 Pomona College 11/08/93 0 0 94-5160 College of St. Thomas 11/08/93 0 0 94-5161 University System of New Hampshire 11/08/93 0 0 94-5162 Monmouth College 11/08/93 0 0 94-5163 Northwestern University 11/10/93 0 0 94-5164 University of Puerto Rico 11/10/93 0 0 94-5165 Clarkson University 11/10/93 0 0 94-5166 Kenyon College 11/10/93 0 0 94-5167 Haverford College 11/10/93 0 0 94-5168 The Computer Museum, Inc. 11/10/93 0 0 94-5169 American Society for Engineering Education 11/10/93 0 0 94-5170 Westmont College 11/10/93 0 0 94-5171 Harvey Mudd College 11/10/93 0 0 94-5172 Illinois Benedictine College 11/10/93 0 0 94-5173 University of Arkansas 11/12/93 0 0 94-5174 Barnard College 11/12/93 3,400 0 94-5175 Shriver Center for Mental Retardation 11/12/93 0 0 94-5176 University of Southern Mississippi 11/12/93 0 0 94-5177 Wellesley College 11/12/93 0 0 94-5178 Manhattan College 11/12/93 0 0 94-5179 Meharry Medical College 11/12/93 0 0 94-5180 Wayne State University 11/12/93 0 0 94-5181 Pitzer College 11/12/93 0 0 94-5182 Ohio State University 11/12/93 0 0 94-5183 Messiah College 11/12/93 0 0 94-5184 Associated Collegiate Schools of Architecture 11/12/93 0 0 94-5185 Stanford University 11/12/93 0 0 94-5186 Stanford University 11/12/93 0 0 94-5187 Stanford University 11/12/93 0 0 94-5188 Tufts University 11/12/93 0 0 94-5189 State of Georgia 11/12/93 0 0 94-5190 Clark University 11/15/93 0 0 94-5191 Moravian College 11/15/93 0 0 94-5192 University of Missouri- Columbia 11/15/93 0 0 94-5193 Pennsylvania State University 11/15/93 2,278 0 94-5194 Catholic University of America 11/15/93 0 0 94-5195 Franklin & Marshall College 11/15/93 0 0 94-5196 Babson College 11/15/93 0 0 94-5197 Westminister College 11/15/93 0 0 94-5198 Oakland University 11/15/93 0 0 94-5199 Christian Brothers University 11/15/93 0 0 94-5200 Amherst College 11/15/93 0 0 94-5201 Medical College of Pennsylvania 11/15/93 0 0 94-5202 Milwaukee Public Museum 11/15/93 0 0 94-5203 Mercer University 11/15/93 0 0 94-5204 Santa Clara University 11/15/93 0 0 94-5205 New School for Social Research 11/15/93 0 0 94-5206 Saint Vincent College 11/15/93 0 0 94-5207 Randolph-Macon College 11/15/93 0 0 94-5208 Colby College 11/15/93 5,067 5,067 94-5209 Vermont State Colleges 11/19/93 0 0 94-5210 Vermont State Colleges 11/19/93 0 0 94-5211 Case Western Reserve 11/29/93 0 0 94-5212 University of Puget Sound 11/29/93 0 0 94-5213 University of Puget Sound 11/29/93 0 0 94-5214 Northwest Community College 11/29/93 0 0 94-5215 Ohio Northern University 11/29/93 0 0 94-5216 Moravian College 11/29/93 0 0 94-5217 University of Health Sciences/Chicago Medical School 11/29/93 0 0 94-5218 Curry College 11/29/93 0 0 94-5219 Fox Chase Cancer Center 11/29/93 0 0 94-5220 Furman University 11/29/93 0 0 94-5221 Northwestern University 11/29/93 0 0 94-5222 Fred Hutchinson Cancer Research Center 11/29/93 0 0 94-5223 Hampden-Sydney College 11/29/93 0 0 94-5224 Incarnate Word College 11/29/93 0 0 94-5225 University of Alabama - Huntsville 11/29/93 0 0 94-5226 University of Health Sciences/Chicago Medical School 11/29/93 0 0 94-5227 University of Alabama 11/29/93 0 0 94-5228 Idaho State University 11/29/93 0 0 94-5229 Western New England College 11/29/93 0 0 94-5230 Gallaudet University 11/29/93 0 0 94-5231 Foundation for Blood Research 11/29/93 0 0 94-5232 Research Foundation for Mental Hygiene 11/29/93 0 0 94-5233 Merrimack College 11/29/93 0 0 94-5234 Morehouse School of Medicine 11/29/93 5,715 5,715 94-5235 Southwestern University 11/29/93 0 0 94-5236 Suffolk University 11/29/93 0 0 94-5237 Texas Christian University 11/29/93 0 0 94-5238 Marquette University 11/29/93 0 0 94-5239 Southern Methodist University 11/29/93 0 0 94-5240 Tulane University 11/29/93 0 0 94-5241 Tougaloo College 11/29/93 0 0 94-5242 Broome Community College 11/29/93 0 0 94-5243 Fairchild Tropical Garden 11/29/93 0 0 94-5244 California State University/ Sacramento Foundation 11/29/93 0 0 94-5245 San Jose State University Foundation 11/29/93 0 0 94-5246 Council of Chief State School Officers 11/30/93 0 0 94-5247 Cooper Union 11/30/93 0 0 94-5248 Wittenberg University 11/30/93 0 0 94-5249 Pepperdine University 11/30/93 0 0 94-5250 Boyce Thompson Institute for Plant Research 11/30/93 0 0 94-5251 Trenton State College 11/30/93 0 0 94-5252 Haverford College 11/30/93 0 0 94-5253 Foundation for Blood Research 11/30/93 0 0 94-5254 Seton Hall College 11/30/93 0 0 94-5255 Vanderbilt University 11/30/93 0 0 94-5256 American Society of Civil Engineers 11/30/93 0 0 94-5257 Beckman Research Institute of the City of Hope 11/30/93 0 0 94-5258 San Francisco State University Foundation 11/30/93 0 0 94-5259 Eastern Michigan University 11/30/93 0 0 94-5260 California State University/ Long Beach Foundation 11/30/93 0 0 94-5261 Metropolitan Museum of Art 11/30/93 0 0 94-5262 California Polytechnic State University Foundation 11/30/93 0 0 94-5263 Wabash College 11/30/93 0 0 94-5264 Rochester Institute of Technology 11/30/93 0 0 94-5265 Central Institute for the Deaf 11/30/93 0 0 94-5266 Wistar Institute 11/30/93 0 0 94-5267 Monell Chemical Senses Center 11/30/93 0 0 94-5268 Oklahoma Medical Research Foundation 11/30/93 0 0 94-5269 Embry Riddle Aeronautical University 11/30/93 0 0 94-5270 Hansen Planetarium 11/30/93 0 0 94-5271 State of Kansas 11/30/93 0 0 94-5272 Health Research, Inc. 11/30/93 0 0 94-5273 Educational Service District No. 112 11/30/93 0 0 94-5274 Miami-Dade Community College 11/30/93 0 0 94-5275 University of Alabama - Birmingham 11/30/93 0 0 94-5276 American Association of State Colleges and Universities 11/30/93 0 0 94-5277 Health Research, Inc. 11/30/93 0 0 94-5278 Sonoma State University Academic Foundation 11/30/93 0 0 94-5279 Bryn Mawr College 12/01/93 0 0 94-5280 Gannon University 12/01/93 0 0 94-5281 Hamline University 12/01/93 0 0 94-5282 Loyola College in Maryland 12/01/93 0 0 94-5283 Livingston University 12/01/93 0 0 94-5284 Pittsburgh Board of Public Education 12/01/93 0 0 94-5285 St. Mary's University - San Antonio 12/01/93 0 0 94-5286 Medical Foundation of Buffalo, Inc. 12/01/93 0 0 94-5287 Humboldt State University Foundation 12/01/93 0 0 94-5288 New York University Medical Center 12/01/93 0 0 94-5289 Palm Beach Community College 12/01/93 0 0 94-5290 Assumption College 12/01/93 0 0 94-5291 Fordham University 12/01/93 0 0 94-5292 Henry M. Jackson Foundation for the Advancement of Military Medicine 12/01/93 0 0 94-5293 Roanoke College 12/01/93 0 0 94-5294 Montefiore Medical Center 12/01/93 0 0 94-5295 Michigan State University 12/01/93 0 0 94-5296 New York Academy of Sciences 12/01/93 0 0 94-5297 Oak Ridge Associated Universities 12/01/93 0 0 94-5298 Ithaca College 12/01/93 307 307 94-5299 Education Development Center 12/02/93 0 0 94-5300 Eastern New Mexico University 12/02/93 0 0 94-5301 Randolph-Macon Woman's College 12/02/93 0 0 94-5302 Pennsylvania State System of Higher Education 12/02/93 0 0 94-5303 Worcester Polytechnic Institute 12/02/93 0 0 94-5304 Mississippi State University 12/02/93 0 0 94-5305 Baylor College of Medicine 12/02/93 0 0 94-5306 Union College 12/02/93 0 0 94-5307 Mercyhurst College 12/02/93 0 0 94-5308 Council Chief State School Office 12/02/93 0 0 94-5309 Wheaton College 12/02/93 0 0 94-5310 Council for Retarded Citizens of Jefferson County (KY) 12/02/93 0 0 94-5311 Medical College of Wisconsin 12/02/93 0 0 94-5312 National Biomedical Research Foundation 12/02/93 0 0 94-5313 Molecular Research Institute 12/02/93 0 0 94-5314 Haskins Laboratories Inc. 12/02/93 0 0 94-5315 Maricopa Community Colleges (AZ) 12/02/93 0 0 94-5316 Mount Holyoke College 12/02/93 0 0 94-5317 University of New Mexico 12/02/93 6,392 6,392 94-5318 Creighton University 12/02/93 0 0 94-5319 Wistar Institute 12/02/93 0 0 94-5320 San Diego State University Foundation 12/02/93 0 0 94-5321 Carnegie Mellon University & Software Engineering Institute 12/03/93 0 0 94-5322 Delta State University 12/03/93 0 0 94-5323 Illinois State Museum 12/03/93 0 0 94-5324 American Institute for Research in the Behavioral Sciences 12/03/93 0 0 94-5325 Kean College of New Jersey 12/03/93 0 0 94-5326 Allegheny College 12/03/93 0 0 94-5327 Long Island University 12/03/93 0 0 94-5328 Davidson College 12/03/93 10,000 10,000 94-5329 California State University Hayward Foundation 12/03/93 0 0 94-5330 California Institute of Technology 12/03/93 0 0 94-5331 University of Notre Dame 12/03/93 1,702 1,702 94-5332 Federation of American Societies for Experimental Biology 12/03/93 0 0 94-5333 Hillsborough County Public Schools (FL) 12/03/93 0 0 94-5334 Kent State University 12/03/93 108 108 94-5335 Development Studies Center 12/03/93 0 0 94-5336 Keystone Center for Continuing Education 12/03/93 0 0 94-5337 Connecticut College 12/03/93 0 0 94-5338 University of Mississippi Medical Center 12/03/93 0 0 94-5339 University of Detroit 12/03/93 0 0 94-5340 Wheelock College 12/03/93 0 0 94-5341 Central Michigan University 12/03/93 0 0 94-5342 Smith-Kettlewell Eye Research Institute 12/03/93 0 0 94-5343 Sloan-Kettering Institute for Cancer Research 12/03/93 0 0 94-5344 Siena College 12/03/93 0 0 94-5345 Santa Fe Institute 12/03/93 0 0 94-5346 Auburn University 12/03/93 0 0 94-5347 Rhode Island Hospital 12/03/93 0 0 94-5348 Owens Technical College 12/03/93 0 0 94-5349 Illinois State University 12/03/93 0 0 94-5350 Albany State College 12/03/93 0 0 94-5351 Lesley College 12/03/93 0 0 94-5352 Woods Hole Oceanographic Institution 12/03/93 0 0 94-5353 Butler University 12/03/93 0 0 94-5354 Hampshire College 12/03/93 0 0 94-5355 Evangel College 12/03/93 0 0 94-5356 Florence-Darlington Technical College 03/15/94 0 0 94-5357 National Biomedical Research Foundation 03/23/94 0 0 94-5358 American Institute of Chemical Engineering 03/15/94 0 0 94-5359 American Institute of Biological Sciences 03/15/94 0 0 94-5360 American Association of State Colleges and Universities 03/15/94 0 0 OVERSIGHT Date Report Questioned Unsupported Number Grantee Issued Costs Costs 93-3230 Conflicts-of-Interests Review: Intergovernmental Personnel Act Assignees Entering and Leaving, August 1993 01/26/94 0 0 93-3231 Conflicts-of-Interests Reviews: Volunteers Entering and Leaving, September 1993 10/08/93 0 0 93-3232 Conflicts-of-Interests Reviews: NSF Staff and Rotators Entering and Leaving, September 1993 02/01/94 0 0 93-3233 Conflicts-of-Interests Intergovernmental Personnel Act Assignees Entering and Leaving, September 1993 02/04/94 0 0 93-3234 Conflicts-of-Interests Reviews: Volunteers Entering and Leaving, October 1993 11/15/93 0 0 93-3235 Conflicts-of-Interests Reviews: NSF Staff and Rotators Entering and Leaving, October 1993 01/14/94 0 0 93-3236 Conflicts-of-Interests Reviews: Intergovernmental Personnel Act Assignees Entering and Leaving, October - November 1993 02/16/94 0 0 93-3237 Conflicts-of-Interests Reviews: Volunteers Entering and Leaving, November 1993 01/03/94 0 0 93-3238 Conflicts-of-Interests Reviews: NSF Staff and Rotators Entering and Leaving, November 1993 01/28/94 0 0 93-3239 Conflicts-of-Interests Reviews: Volunteers Entering and Leaving, December 1993 02/01/94 0 0 93-3240 Conflicts-of-Interests Reviews: NSF Staff and Rotators Entering and Leaving, December 1993 02/16/94 0 0 93-3241 Conflicts-of-Interests Intergovernmental Personnel Act Assignees Entering and Leaving, December 1993 02/01/94 0 0 94-3200 Committee of Visitors: Status of Reviews 4th Quarter, FY 1993 01/20/94 0 0 94-3201 Committee of Visitors: Status of Reviews 1st Quarter, FY 1994 03/18/94 0 0 94-3202 Conflicts-of-Interests Reviews: Volunteers Entering and Leaving, January 1994 02/14/94 0 0 94-3203 Conflicts-of-Interests Reviews: NSF Staff and Rotators Entering and Leaving, January 1994 02/16/94 0 0 94-3204 Conflicts-of-Interests Intergovernmental Personnel Act Assignees Entering and Leaving, January 1994 03/10/94 0 0 94-3205 Conflicts-of-Interests Reviews: Volunteers Entering and Leaving, February 1994 03/02/94 0 0 94-3206 Conflicts-of-Interests Reviews: NSF Staff and Rotators Entering and Leaving, February 1994 03/09/94 0 0 94-3207 Conflicts-of-Interests Reviews: Intergovernmental Personnel Act Assignees Entering and Leaving, February 1994 03/08/94 0 0 94-3208 Oversight Review: Proposal Actions: Director for Education & Human Resources 4th Quarter FY 1993 and 1st Quarter FY 1994 03/31/94 0 0 Statistical Information Required by the Inspector General Act of 1978, as Amended Table I. Audit Reports Issued With Questioned Costs Questioned Unsupported Number Costs Costs A. For which no management decisions has been make by the commencement of the reporting period. 37 3,060,957 1,619,252 B. Which were issued during the reporting period. 43 1,518,928 484,289 C. Adjustments to questioned costs resulting from resolution activities. 41,266 0 Subtotals of (A+B+C) 80 4,621,151 2,103,541 D. For which a management decision was made during the reporting period. 37 1,348,864 550,872 (i) dollar value of disallowed costs 0 268,199 N/A (ii) dollar value of cost not disallowed 0 1,080,665 N/A E. For which no management decision has been made by the end of the reporting period. 43 3,272,287 1,552,669 Report for which no management decision was made within 6 months of issuance. 9 1,811,234 1,086,288 Inspector General Reports ***************************************************************** Funds to be Put to Better Use: Funds the OIG has identified in an audit recommendation that could be used more efficiently by reducing outlays, deobligating program or operational funds, avoiding unnecessary expenditures, or taking other efficiency measures. ***************************************************************** Table II. Audit Reports Issued With Recommendations For Better Use of Funds Number Dollar Value A. For which no management decision had been made by the commencement of the reporting period. 0 0 B. Which were issued during the reporting period. 2 1,363,000 Subtotals of A & B 2 1,363,000 C. For which a management decision was made during the reporting period. (i) dollar value of recommendations that were agreed to by management 2 1,363,000 based on proposed management action 2 1,363,000 based on proposed legislative action 0 0 (ii) dollar value of recommendations that were agreed to by management 0 0 D. For which no management decision has been made by the end of the reporting period. 0 0 Report for which no management decision was made within 6 months of issuance. 0 0 ADDITIONAL PERFORMANCE MEASURE As required by the Inspector General Act of 1978, we provide tables in each Semiannual Report to Congress that give statistical information on work conducted by our audit and investigation units. Tables that provide statistics concerning these required performance measures are on pages 23, 71, and 72. Vice President Gore's National Performance Review, the General Accounting Office, and OMB have suggested that Office of Inspector General develop additional performance measures that provide information about our activities. As a result, we developed an additional performance measure to better explain the work of our office. OIG staff members regularly conduct reviews of internal NSF operations. These reviews often result in systemic recommendations that are designed to improve the economy and efficiency of NSF operations. We routinely track these systemic recommendations and report to NSF's Director and Deputy Director quarterly about the status of our recommendations. The following table provides statistical information about the status of all systemic recommendations that involve internal operations of the Foundation. The statistics demonstrate that NSF management has agreed to resolve our systemic recommendations in a reasonable manner. Status of Systemic Recommendations That Involve Internal NSF Management Open Recommendations Recommendations Open at the Beginning of the Reporting Period 49 New Recommendations Made During Reporting Period 9 Total Recommendations to be Addressed 58 Management Resolution of Recommendations1 Recommendations Awaiting Management Resolution 14 Recommendations Resolved by Management 44 Management Agrees to Take Reasonable Action 44 Management Decides No Action is Required 0 Final Action on OIG Recommendations2 Final Action Completed 22 Recommendations Open at End of Period 36 [Footnote 1] "Management Resolution" occurs when management completes its evaluation of an OIG recommendation and issues its official response identifying the specific action that will be implemented in response to the recommendation. [Footnote 2] "Final Action" occurs when management has completed all actions it has decided are appropriate to address an OIG recommendation. Aging of Open Recommendations Awaiting Management Resolution: 0 through 6 Months 9 7 through 12 Months 5 More than 12 Months 0 Awaiting Final Action After Resolution: 0 through 6 Months 1 7 through 12 Months 6 13 through 18 Months 8 19 through 24 Months 2 More than 24 Months 5 Recommendations Where Management Decides No Action is Required None to report during this period. Recommendations Awaiting Management Resolution for More Than 12 Months None to report during this period. Recommendations Awaiting Final Action for More Than 24 Months In Report No. OAO-15-04-88, "Review of the NSF Computer Security Program," April 15, 1988, we recommended that a risk analysis for computer operations be performed and a contingency plan consistent with published guidelines be developed. One proposal for preparing a contingency plan was received, but the cost was greater than anticipated. Therefore, another proposal was requested. In addition, an alternate processing site is being reviewed. Although the delays in implementation were excessive, no losses have resulted. We consider the current action to be reasonable. In Report No. OAO-19-06-88, "Review of Passwords for the Electronic Timecard System," June 15, 1988, we recommended that encrypted passwords be developed for the electronic timecard system. Management deferred implementation of this recommendation because a new payroll/personnel system that would include this feature was already being planned. However, the new system was delayed because of constraints. We consider management's action to be reasonable. In Report No. OIG-02-89, "Followup Review of NSF Time and Attendance Reporting System," March 6, 1989, we recommended that daily employee flexitime records be automated and interfaced with the electronic timecard system. The records were automated, but the system interface was postponed and scheduled as part of a new payroll/personnel system. We are concerned about the delay in implementing this interface (see detailed information on page 14 of this report). We estimate that NSF will save at least $900,000 and put these funds to better use once the planned interface system is implemented. In Report No. OIG 91-2104, "Review of NSF's Vouchers Payable System," June 28, 1991, we recommended that a quality control system be established to assess performance of the voucher payable system. Interim manual procedures were developed and plans were made to develop and implement automated quality control mechanisms. We consider management's action to be reasonable. In Report No. OIG 91-2104,"Review of NSF's Vouchers Payable System," we also recommended that the financial office not use the first-in-first out system to charge large dollar, multi-year contracts and match obligations with expenses. NSF is conducting reviews to determine which contracts meet these criteria and how to properly account for these contracts. We consider management's action to be reasonable. Prepared by: Office of Inspector General National Science Foundation For additional copies, write: Office of Inspector General 4201 Wilson Boulevard Arlington, VA 22230 For additional information, call: Audit (703) 306-2001 Investigations (703) 306-2002 Oversight Activities (including misconduct in science and inspections) (703) 306-2006 Legal Issues (703) 306-2100 Electronic Mail Hotline: oig@nsf.gov