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

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Publication date: 
25 May 2012

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.

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