October 2006 




The Office of Inspector General will issue this newsletter periodically to report the results of recent audits, investigations, and other work related to NSF's programs. Our intent is to help members of the research community become more aware of the types of problems that may be found during an audit or investigation, as well as measures that may be taken to prevent them.




In This Issue








Audit of University’s Effort Reporting System Discloses Significant Weaknesses ::

An OIG audit found that the University of Pennsylvania’s effort reporting system could not demonstrate that at least $9.2 million or 37 percent of the $24.9 million of labor costs charged to NSF in fiscal years 2002 through 2004, actually benefited NSF awards.  UPENN business managers approved and signed effort reports for salaries charged to NSF, without confirmation or determination that time reflected on the effort reports represented reasonable estimates of the actual effort expended.  UPENN principal investigators and business managers also did not approve effort reports within the 45-day period specified by UPENN policy.  Without timely or suitable means to verify effort reports, UPENN was unable to ensure that salary and wage costs charged to NSF awards reasonably reflected actual effort worked on NSF projects.  We believe that the systemic nature of these weaknesses raises concerns about the reasonableness and allowability of the labor effort charges on UPENN’s other $525 million of Federal awards it receives each year.


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:: $3.3 Million Is Returned to NSF as a Result of Investigation ::

An OIG investigation into embezzlement at a university revealed other management control weaknesses that resulted in the recovery or de-obligation of $3,367,256 in NSF funds over a 3-year period.  The investigation involved a university employee who was subsequently convicted of embezzling more than $487,000 in university funds, including $415,000 in NSF funds.  In addition to finding evidence of embezzlement, investigators discovered that the university certified to inaccurate cost-sharing contributions each year of the award, and could not support a number of expenses charged to the NSF grant. 


OIG worked with the U.S. Attorney’s Office for the Eastern District of Virginia to negotiate a settlement with the university that required it to reimburse $809,477 to the government.  The settlement agreement also included provisions requiring the university to establish a compliance program to ensure future adherence to federal requirements and regulations and to provide annual reports to NSF on the progress and success of the program for a period of three years.  In total, $3,367,256 were put to better use by NSF as a result of the investigation, including funds that were either returned by the university or de-obligated by NSF over a 3-year period. 




:: More Information about Results of NSF Research Sought by Constituents ::

An OIG audit report found that NSF constituents have an interest in obtaining more information about NSF-funded research.  Organization executives and NSF program officers interviewed expressed an overwhelming interest in having NSF post brief summaries of research results and publication citations on its website.  Interest was also indicated in posting conference proceedings, abstracts of journal articles, and final project reports.  The report recommends that NSF use its position on various government-wide committees to advocate for the inclusion of brief summaries in project reports, which could be made available to the public.  In addition, the agency should consider posting other formats, such as conference proceedings, journal abstracts, and conference proceedings on its website.


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:: PI and Secret Author Found to Commit Research Misconduct ::

NSF found that a PI and a co-worker committed research misconduct based on an OIG investigation of plagiarism involving three Small Business Innovation Research (SBIR) proposals.  The PI, who worked for a small company, initially admitted plagiarizing materials in all three proposals.  However prior to adjudication, and after reviewing a copy of our investigation report, the PI identified a co-worker as the actual author of the third proposal.  He also stated that the co-worker had been the source of the answers to our questions about the third proposal.  At that point, the co-worker admitted to being the author and said that the CEO had asked the PI to submit the proposal in his place.  He described his use of the copied text as an unintentional mistake.  NSF concluded that both individuals committed research misconduct and required (1) the PI to certify for a period of three years that NSF proposals he submits do not violate NSF’s Research Misconduct regulation and (2) the co-worker to complete a course in research ethics. 



:: NSF Procedures for University Indirect Cost Recovery Are Inconsistent with Federal Grant Requirements ::

Contrary to federal grant requirements, NSF allows universities and colleges to recover indirect (overhead) costs utilizing rates negotiated subsequent to making the initial grant award.  Federal policy requires institutions to use a same rate throughout the life of the award in order to preserve the level of funds spent on research as opposed to administrative support.  Our review of 23 of NSF’s top 100 funded universities found that the policies at 14 universities follow federal requirements.  However, the nine University of California campuses model their institutional policy after NSF’s to permit use of newly negotiated rates, and three of these campuses inappropriately shifted $1.9 million, over a nine-year period, from direct research activities to administrative support. 


The federal requirement allows funding agencies to determine with certainty the total funds available for research throughout the award.  Inconsistency between NSF’s policy and federal requirements has created confusion in the awardee community regarding the appropriate indirect cost rate to charge on federal awards.  NSF agreed with the audit recommendation to revise its Grant Policy Manual provisions for recovering indirect grant costs to make them consistent with the federal requirement by the end of this year.


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To report a possible instance of fraud, waste, or abuse pertaining to NSF programs or awards, please call our hotline at 1-800-428-2189 or contact us at oig@nsf.gov. For more information about OIG activities, visit our website: www.nsf.gov/oig

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