FYI: The AIP Bulletin of Science Policy News

Subcommittee on Research and Science Education Holds Hearing to Examine Spending at the National Science Foundation

Aline D. McNaull
Number 75 - May 25, 2012  |  Search FYI  |   FYI Archives  |   Subscribe to FYI

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On May 9, the House Science, Space, and Technology Committee’s Subcommittee on Research and Science Education held a hearing entitled “Ensuring the Best Stewardship of American Taxpayer Dollars at the National Science Foundation” during which Members heard from Allison Lerner, Inspector General of the National Science Foundation (NSF), on findings of the Office of the Inspector General (OIG).

The NSF OIG “provides independent oversight of the Foundation’s programs and operations.  The OIG is responsible for promoting efficiency and effectiveness in agency programs and for preventing and detecting fraud, waste, and abuse” according to the hearing charter prepared by committee staff. “The OIG is responsible for assessing internal controls, financial management, information technology, and other systems that affect the operation of NSF programs….  The OIG conducts independent and objective audits, investigations, and other reviews to support NSF in its mission by promoting the economy, efficiency, and effectiveness and safeguarding the integrity of NSF programs and operations” further explains the hearing charter.            

Members of the subcommittee were particularly focused on addressing the issue of contingency costs during this hearing.  Their interest in this topic echoed the Report prepared by the House Appropriations Committee to accompany HR 5326, the Commerce, Justice, and Science Appropriations Bill for 2013, which stated:

“NSF has been engaged in a lengthy discussion process with the NSF OIG to resolve an ongoing dispute about project contingency budgets. Tens of millions of dollars of potentially unallowable contingency costs hinge on the resolution of this dispute, and the Committee believes that it is taking too long for a consensus resolution to be reached. NSF is directed to provide the Committees on Appropriations with an immediate update on the status of efforts to resolve these issues and to provide quarterly updates thereafter until such time that NSF and the OIG reach an agreement.”

The FYI on that report can be read here

Subcommittee Chairman Mo Brooks (R-AL) was interested in the latest developments on the Major Research Equipment and Facilities Construction (MREFC) projects contingency issue.”  Brooks was also concerned about the findings of the NSF OIG on the issue of fraud and abuse, stating that “by identifying individuals who attempt to abuse the public trust or defraud government programs, the OIG also enforces integrity in agency operations.”

Ranking Member Dan Lipinski (D-IL) cited, in his opening statement, that he believes that the National Science Foundation is a good steward of American taxpayer dollars, but it is our job on this subcommittee to be continually vigilant in our oversight.”  He stated that “any incidents of misuse of grant funds, including in the SBIR [Small Business Innovation Research] program, would be of great concern” and added that he “would not want to see broad support for the SBIR program erode because of the dishonest actions of a very small minority of grantees.”  He also expressed interest in questions raised by Lerner’s testimony which include “the way NSF manages for potential conflict of interest among its grantees, and the appropriateness of NSF’s policies for independent research and development for its staff.”

In her testimony, Lerner outlined the oversight role of OIG highlighting that “since the agency’s primary mission activity is accomplished through funding external awardees, the success of NSF’s overall mission and the achievement of its goals are largely dependent on effective grant and contract administration.”  She discussed the OIG’s oversight of NSF’s grant and contract management and focused on the special risks related to contingency funding in NSF’s large facility projects. 

The subcommittee held two recent hearings on funding issues at large research facilities, those FYIs are available here and here

Regarding grants management, Lerner stated that OIG audits found that “NSF needs to continue to improve its grant management activities, including the oversight of awardees’ financial accountability, programmatic performance, and compliance with applicable federal and NSF requirements.”  She added that “NSF has indicated that staffing constraints caused it to reduce the number of site visits to monitor high-risk awardees.”  She also pointed to OIG concerns regarding increases in workload and budget constraints and added that “ensuring that recipient institutions adequately monitor sub-awardees has been a continuing challenge at NSF.” 

On the subject of contract monitoring, Lerner stated that the OIG has directed attention to “adequate monitoring of cost reimbursement contracts.”  She highlighted that because NSF has “decided to maintain its portfolio of cost reimbursement contracts, this type of oversight takes on renewed importance to protect taxpayer funds.” 

An area of ongoing concern, according to Lerner, is “NSF’s oversight of the construction of the large facility projects it funds.”  Lerner pointed out that in recent years, “NSF has instituted a policy of ensuring these projects do not exceed their planned budgets by requiring a level of ‘contingency’ costs in the initial budget.” 

Lerner discussed the Defense Contract Audit Agency’s (DCAA) audits of the proposed budget of three of NSF’s large facility construction projects – the Ocean Observatories Initiative (OOI), the Advanced Technology Solar Telescope (ATST), and the National Ecological Observatory Network (NEON).  Lerner cited that “in each instance, the audit work revealed significant problems with the proposed budgets because the applicable OMB [Office of Management and Budget] cost principles do not allow ‘contributions to a contingency reserve or any similar provision made for events the occurrence of which cannot be foretold with certainty as to time, intensity, or with an assurance of their happening.’” 

Lerner also addressed topics including stimulus spending, oversight of wireless plans and device purchases, NSF light refreshment purchases and independent research/development travel.  She highlighted that OIG is “currently focusing significant investigative attention on fraud in the Small Business Innovation Research (SBIR) program” adding that “since 2009, we have opened 70 investigations involving SBIR awards, and we currently have 40 active SBIR investigations, 15 of which are being coordinated with the Department of Justice for possible civil/criminal action.”  Regarding NSF actions on this issue, she stated that NSF has implemented all of the OIG’s recommendations. 

Following Lerner’s testimony, Brooks inquired about the “significant problems” associated with the contingency funds to which Lerner provided further details of the audits done by DCAA.  She explained that in each audit, the amounts proposed for contingencies were not consistent with the governing cost principle.  DCAA found that in all three cases there were inconsistencies with the cost principle and that the amounts of those contingency costs were not supported with variable costs. 

Brooks also requested that Lerner provide further information about fraud in the SBIR programs to which Lerner assured him that “the vast majority of people who participate in the SBIR program are good people doing good work for the government.” 

Lipinski was interested to learn more about contingency funds and specifically wanted Lerner’s opinion on proposed language for contingency fund management.  Lipinski also asked for further clarification as to how the DCAA monitors the major research equipment facilities construction cooperative agreements to which Lerner stated that the DCAA does routinely examine these agreements in addition to its monitoring of contracts. 

Rep. Larry Bucshon (R-IN) asked whether staffing constraints are a major impediment to achieving better grant and contract administration to which Lerner replied that she believed that is the position the NSF is taking.  Lerner stated that she believes that the focus should be on finding ways to operate differently given the present budgeting and staffing constraints. 

The next semi-annual NSF OIG report will be transmitted to Congress on or before May 31, 2012.

Aline D. McNaull
Government Relations Division
American Institute of Physics