[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
ENSURING THE BEST STEWARDSHIP
OF AMERICAN TAXPAYER DOLLARS
AT THE NATIONAL SCIENCE FOUNDATION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON RESEARCH AND SCIENCE EDUCATION
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, MAY 9, 2012
__________
Serial No. 112-83
__________
Printed for the use of the Committee on Science, Space, and Technology
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Available via the World Wide Web: http://science.house.gov
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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR., EDDIE BERNICE JOHNSON, Texas
Wisconsin JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas LYNN C. WOOLSEY, California
DANA ROHRABACHER, California ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois DONNA F. EDWARDS, Maryland
W. TODD AKIN, Missouri BEN R. LUJAN, New Mexico
RANDY NEUGEBAUER, Texas PAUL D. TONKO, New York
MICHAEL T. McCAUL, Texas JERRY McNERNEY, California
PAUL C. BROUN, Georgia TERRI A. SEWELL, Alabama
SANDY ADAMS, Florida FREDERICA S. WILSON, Florida
BENJAMIN QUAYLE, Arizona HANSEN CLARKE, Michigan
CHARLES J. ``CHUCK'' FLEISCHMANN, SUZANNE BONAMICI, Oregon
Tennessee VACANCY
E. SCOTT RIGELL, Virginia VACANCY
STEVEN M. PALAZZO, Mississippi VACANCY
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
------
Subcommittee on Research and Science Education
HON. MO BROOKS, Alabama, Chair
ROSCOE G. BARTLETT, Maryland DANIEL LIPINSKI, Illinois
BENJAMIN QUAYLE, Arizona HANSEN CLARKE, Michigan
STEVEN M. PALAZZO, Mississippi PAUL D. TONKO, New York
ANDY HARRIS, Maryland TERRI A. SEWELL, Alabama
RANDY HULTGREN, Illinois SUZANNE BONAMICI, Oregon
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas
C O N T E N T S
Wednesday, May 9, 2012
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Mo Brooks, Chairman, Subcommittee on
Research and Science Education, Committee on Science, Space,
and Technology, U.S. House of Representatives.................. 11
Written Statement............................................ 12
Statement by Representative Daniel Lipinski, Ranking Minority
Member, Subcommittee on Research and Science Education,
Committee on Science, Space, and Technology, U.S. House of
Representatives................................................ 12
Written Statement............................................ 14
Witnesses:
Ms. Allison C. Lerner, Inspector General, National Science
Foundation
Oral Statement............................................... 15
Written Statement............................................ 18
Appendix I: Answers to Post-Hearing Questions
Ms. Allison C. Lerner, Inspector General, National Science
Foundation..................................................... 48
ENSURING THE BEST STEWARDSHIP
OF AMERICAN TAXPAYER DOLLARS
AT THE NATIONAL SCIENCE FOUNDATION
----------
WEDNESDAY, MAY 9, 2012
House of Representatives,
Subcommittee on Research and Science Education,
Committee on Science, Space, and Technology,
Washington, D.C.
The Subcommittee met, pursuant to call, at 2:02 p.m., in
Room 2318 of the Rayburn House Office Building, Hon. Mo Brooks
[Chairman of the Subcommittee] presiding.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Brooks. The Subcommittee on Research and Science
Education will come to order.
Good afternoon. Welcome to today's hearing entitled,
``Ensuring the Best Stewardship of American Taxpayer Dollars at
the National Science Foundation.'' The purpose of today's
hearing is to provide oversight of the National Science
Foundation, including the examination of various issues
identified by the NSF Office of Inspector General.
I now recognize myself for five minutes for an opening
statement.
I would like to thank Ms. Lerner for being with us today to
discuss the oversight role of the National Science Foundation
Office of Inspector General and current stewardship issues
confronting the NSF.
While we have devoted a number of hearings to oversight in
this Congress, including oversight of NSF Programs and
activities, hearing from the Foundation's Inspector General
about internal and external oversight is particularly
important. With the recent revelations about the General
Services Administration's extravagance and the NOAA magician
debacle still fresh in our minds, I trust there will be no
similar surprises in the upcoming NSF Office of Inspector
General report.
The NSF OIG provides independent oversight of the
Foundation's programs and operations. By statute, the NSF OIG
is independent from the agency, with the Inspector General
reporting directly to the National Services Board and the
Congress. The Administration's fiscal year 2013 budget request
includes over $14 million for the Office of Inspector General,
an amount equal to the fiscal year 2012 estimate.
The OIG assesses internal controls, financial management,
information technology, and other systems that affect the
operation of NSF programs. By identifying individuals who
attempt to abuse the public trust or defraud government
programs, the OIG also enforces integrity in agency operations.
The next semi-annual National Science Foundation Office of
Inspector General report will be available next month. However,
there are a number of issues ripe for discussion today. Last
year alone for the six months ending September 30, 2011, the
OIG investigative staff closed 50 investigations, had five
research misconduct cases result in findings by the National
Science Foundation, and recovered over $12 million for the
government. Additionally, 11 audit reports and reviews were
issued which identified over 200,000 in questioned costs.
In addition to general audit and investigation updates, we
look forward to receiving the latest developments in the Major
Research Equipment and Facilities Construction Projects
contingency issue, something we began discussions about in a
recent subcommittee hearing.
I am particularly interested to learn more about OIG's
oversight of stimulus spending and its concerns regarding fraud
within the Small Business Innovation Research or SBIR Program.
It is my hope, Ms. Lerner, that the OIG will continue to be
a steward of taxpayer dollars, ensuring that NSF programs and
awardees are managed responsibly. I look forward to hearing the
testimony to be presented today and thank you again for taking
time to share your insights with us.
One brief off-the-script remark, we have four votes
scheduled. We are not sure exactly when we are going to be
summoned to vote on a number of issues over on the House Floor,
and I am also on the House Armed Services Committee, and we are
marking up the National Defense Authorization Act. So we may
have to suspend our proceedings as mandated by roll call votes
before asked or House Floor votes.
[The prepared statement of Mr. Brooks follows:]
Prepared Statement of Chairman Mo Brooks
Good afternoon and welcome. I'd like to thank Ms. Lerner for being
with us today to discuss the oversight role of the National Science
Foundation (NSF) Office of Inspector General (OIG) and current
stewardship issues confronting NSF.
While we have devoted a number of hearings to oversight in this
Congress, including oversight of NSF programs and activities, hearing
from the Foundation's Inspector General (IG) about internal and
external oversight is particularly important. With the recent
revelations about GSA extravagance and the NOAA magician debacle still
fresh in our minds, I trust there will be no similar surprises in the
upcoming NSF OIG report.
The NSF OIG provides independent oversight of the Foundation's
programs and operations. By statute, the NSF OIG is independent from
the agency, with the IG reporting directly to the National Science
Board (NSB) and the Congress. The Administration's FY13 budget request
includes over $14 million for the OIG, an amount equal to the FY12
estimate.
The OIG assesses internal controls, financial management,
information technology, and other systems that affect the operation of
NSF programs. By identifying individuals who attempt to abuse the
public trust or defraud government programs, the OIG also enforces
integrity in agency operations.
The next semi-annual NSF OIG report will be available next month;
however, there are number of issues ripe for discussion today. Last
year alone, for the six months ending September 30, 2011, the OIG
investigative staff closed 50 investigations, had five research
misconduct cases result in findings by NSF, and recovered over $12
million for the government. Additionally, eleven audit reports and
reviews were issued which identified over $200 thousand in questioned
costs.
In addition to general audit and investigation updates, we look
forward to receiving the latest developments on the Major Research
Equipment and Facilities Construction (MREFC) projects contingency
issue, something we began discussions about in a recent Subcommittee
hearing. I am particularly interested to learn more about OIG's
oversight of stimulus spending and its concerns regarding fraud within
the Small Business Innovation Research (SBIR) program.
It is my hope, Ms. Lerner, that the OIG will continue to be a
steward of taxpayer dollars, ensuring that NSF programs and awardees
are managed responsibly. I look forward to hearing the testimony to be
presented today and thank you again, for taking time to share your
insights with us.
Chairman Brooks. And so with that the Chair now recognizes
Mr. Lipinski for an opening statement.
Mr. Lipinski. Thank you, Chairman Brooks, and I want to
welcome Ms. Lerner.
I believe that the National Science Foundation is a good
steward of American taxpayer dollars, but it is our job in this
subcommittee to be continually vigilant in our oversight, and I
thank Chairman Brooks for this hearing today.
I also want to thank the Inspector General for being with
us today to help us better understand some of the important
issues and concerns regarding NSF policies and its management
in oversight practices. I appreciate the work the IG does
reviewing NSF policies in protecting against fraud and abuse.
Any incident of research fraud is troubling. Scientists
must always hold themselves and their colleagues to the highest
ethical standards. This is especially imperative when utilizing
taxpayer funds. The 2007 America COMPETES Act, of which I was a
cosponsor, included a provision requiring all universities to
implement training in the responsible conduct of research for
all students and post doc fellows participating in NSF-funded
research.
While isolated incidents continue to occur, the IG appears
to have a productive and effective partnership with NSF program
officers, reviewers in management in uncovering and dealing
with issues swiftly.
Similarly, any incidence of misuse of grant funds,
including in the SBIR Program, would be of great concern to me.
I would not want to see broad support for the SBIR Program
erode because of the dishonest actions of a very small minority
of grantees. So I support the IG's effort to ensure strong
management and oversight in the SBIR Program.
Inspector General Lerner's testimony also raises some
important questions for us to consider. These include the way
NSF manages potential conflict of interest among its grantees
and appropriateness of NSF's policy for independent research
and development for its staff.
Now, before I close I would like to discuss the issue of
contingency funds and the construction of large research
facilities. As the Inspector General likely knows, this
subcommittee began to explore this issue at depth in a March
hearing on NSF's MREFC account. The deputy director of the NSF
testified at that hearing, and it is clear that the perspective
of NSF's management with respect to contingency funds are very
different from those we will hear from Ms. Lerner today.
I recognize that contingency funds are necessary to
construct large facilities such as the ones in MREFC account.
The definition NSF uses for contingency seems consistent with
standards for project management used in the private sector.
That said, there is room for legitimate disagreement on
this matter. The IG raised some real concerns about the
drawdown of contingency funds and whether these funds should be
held by the agency or the project managers. I join the chorus
of interested parties urging you to continue to work toward a
resolution.
At the same time we cannot ignore the fact that OMB is
undertaking a significant overhaul of OMB Circular A-21 that
governs the agency use and management of contingency funds. The
proposed language looks radically different from the current
language used by the IG's Office in their critique of NSF
policy.
In the meantime three MREFC projects already underway are
in limbo not knowing which rules to follow or how to manage
their budgets. I hope the OMB will complete their review
swiftly to help reduce the confusion.
This hearing will not be the last word on contingency
funds, but I am pleased we have the opportunity to hear
directly from the IG on this topic today, and I look forward to
an informative hearing.
Thank you.
[The prepared statement of Mr. Lipinski follows:]
Prepared Statement of Ranking Member Daniel Lipinski
Thank you Chairman Brooks and welcome Ms. Lerner.
I believe 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. I thank the Inspector General
for being with us today to help us better understand some important
issues and concerns regarding NSF policies and its management and
oversight practices. I appreciate the work the IG does reviewing NSF's
policies and protecting against fraud & abuse.
Any incident of research fraud is troubling. Scientists must always
hold themselves and their colleagues to the highest ethical standards.
This is especially imperative when utilizing taxpayer funds. The 2007
America COMPETES Act, of which I was a cosponsor, included a provision
requiring all universities to implement training in the responsible
conduct of research for all students and postdoc fellows participating
in NSF-funded research. While isolated incidents continue to occur, the
IG appears to have a productive and effective partnership with NSF
program officers, reviewers, and management in uncovering and dealing
with issues swiftly.
Similarly, any incidents of misuse of grant funds, including in the
SBIR program, would be of great concern to me. I would not want to see
broad support for the SBIR program erode because of the dishonest
actions of a very small minority of grantees. So I support the IG's
efforts to ensure strong management and oversight in the SBIR program.
Inspector General Lerner's testimony also raises some important
questions for us to consider. These 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.
Before I close I'd like to discuss the issue of contingency funds
and the construction of large research facilities. As the Inspector
General likely knows, this Subcommittee began to explore this issue at
depth in a March hearing on NSF's MREFC account. The Deputy Director of
the NSF testified at that hearing, and it is clear that the
perspectives of NSF Management with respect to contingency funds are
very different from those we will hear from Ms. Lerner today.
I recognize that contingency funds are necessary to construct large
facilities such as the ones in the MREFC account. The definition NSF
uses for contingency seems consistent with standards for project
management used in the private sector. That said there is room for
legitimate disagreement on this matter, and the IG raises some real
concerns about the drawdown of contingency funds and whether these
funds should be held by the agency or the project managers. I join the
chorus of interested parties urging you to continue working toward
resolution.
At the same time, we cannot ignore the fact that OMB is undertaking
a significant overhaul of OMB Circular A-21 that governs agency use and
management of contingency funds. The proposed language looks radically
different from the current language used by the IG's office in their
critique of NSF's policy. In the meantime, three MREFC projects already
underway are in limbo not knowing which rules to follow, or how to
manage their budgets. I hope that OMB will complete their review
swiftly to help reduce the confusion.
This hearing will not be the last word on contingency funds, but I
am pleased we have the opportunity to hear directly from the IG on this
topic today and I look forward to an informative hearing.
Chairman Brooks. Thank you, Mr. Lipinski.
Everybody knows what those bells means. It means that we
have been called for a vote. From what I understand there will
be two votes, and so with that having been said if Mr.
Lipinski's in agreement, we will go ahead and recess and resume
with Ms. Lerner's remarks five minutes after completion of the
last vote, which I believe it is two votes, in which case we
probably should be back here in about 25 to 30 minutes,
although that is a rough approximation. We never know when we
are over there how long past the zero mark the Speaker will
allow votes to continue.
Mr. Lipinski has the idea that maybe we can have Ms.
Lerner's testimony first and then run over there. We have 11
minutes left, so, Ms. Lerner, if you will restrict yourself to
the allotted five minute period of time, then I will go ahead
and give you an introduction, and we will move on.
Ms. Allison C. Lerner assumed the duties as Inspector
General of the National Science Foundation April 2009. In June
of 2011, Ms. Lerner was designated by President Obama as a
member of the Government Accountability and Transparency Board.
She currently chairs the Council of the Inspectors General on
Integrity and Efficiency working groups on suspension and
debarment and research misconduct. Ms. Lerner began her federal
career in 1991, joining the Office of Inspector General of the
United States, Department of Commerce as assistant counsel.
As our witness should know, spoken testimony is limited to
five minutes, however, Ms. Lerner is our only witness, and we
are interested in hearing from her. She may take additional
time, if needed, is what my notes say, but please understand we
are now down to 10 minutes before we are supposed to be over
there voting.
After Ms. Lerner's testimony the members of the committee
will have five minutes each to ask questions, and under the
circumstances I will be somewhat liberal in allotting time for
questions.
With that I now recognize Ms. Lerner for five minutes.
STATEMENT OF ALLISON C. LERNER, INSPECTOR GENERAL, NATIONAL
SCIENCE FOUNDATION
Ms. Lerner. Thank you, Mr. Chairman and Members of the
Subcommittee. I appreciate this opportunity to discuss the work
of the Office of Inspector General to safeguard federal tax
dollars awarded by the National Science Foundation and to
protect the integrity of NSF's programs and operations.
My testimony will focus on the key issues facing effective
stewardship of taxpayer dollars at NSF and the areas my office
has identified as being most at risk for fraud, waste, abuse,
and mismanagement. I will begin by discussing the OIG's
oversight of NSF's grants and contract management with an
emphasis on the special risks related to contingency funding in
NSF's Large Facility Projects.
We found that NSF needs to continue to improve its grant
management activities, including its oversight of awardees'
financial accountability, programmatic performance, and
compliance with applicable federal and NSF requirements. Sub-
recipient monitoring has been another ongoing challenge for NSF
and a recent audit of five awards totaling over $5 million
identified inadequate sub-recipient monitoring as a significant
deficiency contributing to over $450,000 in questioned costs.
Adequate monitoring of cost reimbursement contracts, which are
inherently high risk due to the potential for cost escalation,
also remains a challenge for NSF.
In the past two years we have directed significant
attention to NSF's oversight of the management and use of
contingencies in budgets for its large MREFC projects. On our
behalf the Defense Contract Audit Agency performed audits of
the proposed budgets for three of NSF's large facility
construction projects; the Ocean's Observatories Initiative or
OOI, the Advanced Technology Solar Telescope or ATST, and the
National Ecological Observatory Network, or NEON. In each
instance there were significant problems with the proposed
funding of the awardees for events that were not certain to
occur and could not be supported by verifiable cost data.
Applicable OMB 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.
More specifically, in September, 2010, DCAA found that the
proposed $386 million budget for OOI contained a total of $88
million in unallowable contingency funds. DCAA based this
finding on a lack of evidence to support that amounts budgeted
were for events that were consistent with the OMB cost
principle. Follow-up work failed to surface verifiable cost
data to support the contingency amounts confirming the original
finding that the $88 million proposed is unallowable.
Similar DCAA reviews of the budget proposals for the ATST
and NEON projects identified an additional $136 million in
unallowable contingency costs. DCAA also found a lack of
meaningful controls over the contingency funds provided to
recipients. While awardees are supposed to seek NSF approval
before drawing down contingency funds in excess of a certain
threshold, DCAA found that at present there are no effective
technical barriers in place to prevent these funds from being
drawn down in advance and used for purposes other than a
contingent event. Accordingly, there is a heightened risk of
fraud or misuse of these funds.
We recognize that identifying funds needed for
uncertainties during the conduct of complex construction
projects is an important part of project management. However,
we remain concerned by the risks associated with NSF's practice
of awarding all contingency funds to awardees without regard to
whether they are consistent with a cost principle and supported
by verifiable data.
Simply stated, placing unallowable contingency funds into
awardees' hands is not prudent financial management. We have
recommended that NSF require the awardees to remove unallowable
contingencies and discontinue its practice of awarding and
funding such contingencies, and we are working with NSF to
resolve these findings.
My office also examines how NSF spends money internally for
its own operations and activities. In the current economic
climate it is essential that we carefully study these expenses
to identify opportunities for cost savings, funds that can be
put to better use for the Foundation, and more efficient
purchasing practices. In this vein we have examined NSF's
expenditures for wireless plans and devices, refreshments for
panelists, and the Independent Research and Development Travel
Program. Our reviews have demonstrated the impact of NSF's
decentralized approach to these expenditures. In each instance
there was no Foundation-wide coordination or oversight of the
purchase of similar items, and as a result purchasing practices
varied widely across individual directorates and divisions. NSF
was unable to take advantage of economies of scale when
purchasing, and in the case of light refreshments and IRD
Travel, the Foundation could not even tell how much money it
was spending without substantial effort.
NSF has been receptive to our recommendations and has taken
actions to enhance the cost effectiveness and efficiency of
these expenditures. Our investigations have yielded significant
results, and for the past three years investigative recoveries
for fines, restitutions, and other actions have totaled $21.6
million.
Among other things, we have been directing significant
investigative attention to fraud in the Small Business
Innovation Research Program and since 2009, our SBIR cases have
resulted in over $1.2 million in restitution, funds returned to
NSF, and funds put to better use.
Mr. Chairman, our work reflects my office's sustained
commitment to helping NSF be an effective steward of taxpayer
dollars and benefits from the support of NSF management across
the Foundation. We look forward to our continued partnership
with NSF and Congress to this end.
Thank you.
[The prepared statement of Ms. Lerner follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Brooks. Thank you, Ms. Lerner.
At this point the subcommittee hearing will be in recess
until five minutes after the last vote in this series of votes
on the House Floor.
[Recess.]
Chairman Brooks. The Subcommittee on Research and Science
Education will terminate its recess and come back to order.
Again, I want to welcome everybody to today's hearing
entitled, ``Ensuring the Best Stewardship of American Taxpayer
Dollars at the National Science Foundation.''
Ms. Lerner, I want to reiterate that I thank you for your
testimony and reminding members that committee rules limit
questioning to five minutes.
The Chair will at this time open the round of questions.
The Chair recognizes himself for five minutes.
In the area of contingency funding for major research
facilities construction, can you define the, ``significant
problems,'' your office found with the proposed budgets? And
based on comments from the National Science Foundation and the
NSB at a recent hearing on these projects, it seems that NSF is
not in agreement with the OIG findings.
Can you please explain your thoughts and the major
differences between OIG's oversight and NSF policy? And
finally, will your office be conducting reviews of any other
NSF construction projects with this contingency issue in mind?
Sorry it is back to back to back questions, but if we need
me to repeat any of them, I will.
Ms. Lerner. I will do my best to keep them all in my head.
The issue that we found with contingencies is a fairly
straightforward one. DCAA did three audits of proposed budgets
for ATST, OOI, and NEON for us, and in each instance they found
that the amounts proposed for contingencies were not consistent
with the governing cost principle which requires that the
amounts be and I am going to use the specific language NSF has,
that they be for events the occurrence of which can be foretold
with certainty as to time, intensity, or with an assurance of
their happening. The actual cost principle says it in the
negative, but that is the bottom line. They want no unknowns,
and DCAA found that the amounts in all three proposals were not
consistent with the cost principle, and they were also not
supported by verifiable cost data, which DCAA would want to see
for any cost associated with the proposal, not just
contingencies.
So, I think the issue that we have is perceived by some as
definitional. NSF has stated publicly that it believes that
these amounts for contingencies are for known events that can
be foretold with certainty, and DCAA has looked at the
proposals. They are in the business of looking at these types
of proposals, and they have found the opposite, that they are
not consistent with the definition and that they are not
supported by the type of cost data that they would require.
So that is why they have questioned the amounts here. That
does not mean just because these amounts, you know, are
questioned by DCAA that they can't be considered by NSF in
coming up with its own budget for a project. What the cost
principle does is govern the money that you give to third
parties, and it says if you are going to give money to third
parties, then what you do has to be subject to audit, and it
has to be consistent with the cost principles and supported by
adequate cost data.
If you have amounts for contingencies that aren't quite
that precise and that can't be foreseen with that degree of
certainty, the government can identify those, quantify them as
best they can, and retain them in the government's hand until
the contingent events materialize and then provide them to the
recipients for their use.
So just because these amounts cannot go into the hands of
the recipient does not mean that the government can't try and
identify them and have funds available for them. You just don't
put them in the hands of the third parties.
Chairman Brooks. Thank you. Moving on to your written
testimony that was submitted to the subcommittee, I am going to
read from it for a moment. It states, ``We are currently
focusing significant investigative attention on fraud in the
Small Business Innovative Research or SBIR Program. 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 and or criminal action. The cases involve companies
receiving duplicate funding from more than one SBIR agency.
Conversion of award funds to personal use and or false
statements in claims related to SBIR Program eligibility.''
Based on this testimony it appears that fraud is a
significant problem with the Small Business Innovative Research
Program with the issues ranging from plagiarism to reports of
personal use of funds and more.
Of the 30 investigations that are inactive, how many were
required to return funds to the government? How many were
resolved without issue? And, of the 40 that remain active, how
much funding could the government potentially recover?
Ms. Lerner. I will have to get back with you with the
absolute specifics on that. I believe for the $1.2 million that
we cited as recovering to date those came from approximately
nine matters that were open, and in terms of the entire dollar
amount with--effected by the ongoing investigations we can
report back to you for the record on that.
But I would say the vast majority of people who participate
in the SBIR Program are good people doing good work for the
government, but because it is a program for people who are new
to the government and because it is focused on small
businesses, there are opportunities for folks who may want to
misuse the government's money to take advantage of the system,
and we are trying to focus on them.
But the vast majority of recipients, I think, are well
intentioned and doing their best for the government.
Chairman Brooks. In addition to anything that you just
stated, do you have any other judgment or insight as to why
fraud in the SBIR Programs seems to be such an issue, and do
you have a judgment as to whether there is anything that the
National Science Foundation should be doing that would minimize
or eliminate the risk of this fraud?
Ms. Lerner. Absolutely. One of the challenges that the
agencies have had with, SBIR funds in the past is that there
has been a lack of available information to identify instances
of duplicate funding, and investigating these cases has been
very challenging, and our office recognizing that back in 2009,
set up a working group within the Inspector General community
to bring together the Offices of Inspector General that have
SBIR Programs and focus efforts on working together to combat
fraud. We have a special agent working group that is led by
members from my office and from the Department of Energy where
the agents who are working these investigations are sitting
together and talking about what they are seeing, sharing ideas
so that we can identify instances of duplicate funding, and we
can share information more easily. There have been improvements
to the Tech Net database which has made identifying possible
duplication of effort easier.
And, we are also leading an effort to push out lifecycle
certifications. NSF over the past decade has had certifications
throughout the lifecycle of an SBIR award, which put people on
notice of what they are certifying to when they receive
government funds, and make it easier to prosecute them if they
misuse them. And, it is a best practice that makes our cases
easy to be accepted for prosecution if there is fraud, and the
SBIR Reauthorization Act has asked the SBA to push these types
of certifications out across the SBIR community. We are
coordinating with SBA to ensure that happens.
So there are a lot of good things that can be done, and we
are in the midst of pushing a lot of that effort here at NSF
OIG.
Chairman Brooks. Thank you, Ms. Lerner. There may be a
second round of questions, but at this point I recognize Mr.
Lipinski for his questions.
Mr. Lipinski. Thank you. I want to get back to the issue of
contingency funds as part of facilities construction. As I
mentioned in my opening statement, the Office of Management and
Budget is undertaking a major review of its Circular A-21 that
governs federal grants and cooperative agreements.
In February the OMB released proposed language that would
significantly change the cost principles for contingency funds
for major research facilities. In particular, the language
describes contingency funds as, ``acceptable and necessary,''
and it leaves, ``the method by which contingency funds are
managed and monitored,'' up to each agency, seeming to give
discretion to each agency to manage and monitor contingency
funds.
So I am saying these changes, these proposed changes seem
to give the direction to each agency to manage and monitor the
contingency funds.
Now, your description of the contingency funds for NSF's
current projects is unallowable based on the current OMB cost
principle. Do you have a position on the reform described in
this OMB draft proposal?
Ms. Lerner. I recall the provisions that you read. I think
there are also provisions in the proposed language that was in
the Federal Register Notice that speak to the need for amounts
for contingencies to be supported by verifiable cost data. So
that is something that is consistent with the position that we
have been taking.
I also lead a working group that pulled together comments
of the IG community for OMB on the various issues being
considered as part of that Federal Register Notice, and on the
issue of contingencies, we suggested that OMB make an effort to
harmonize the definition of contingency that is in the cost
principle with the definition of contingency that is in the
FAR, which is more nuanced and makes a distinction between
amounts for contingencies that arise from presently-known and
existing conditions, the effects of which are foreseeable
within reasonable limits of accuracy, and those can be included
in a cost estimate and distinguishes between--from events that
are presently--from costs which arise from presently-known or
unknown conditions, the effects of which can't be measured and
are excluded from cost estimates.
So, we think in terms of clarity, if we could harmonize
with the definition for the cost principle with the definition
that is in the FAR, it would be clearer to everyone. If there
are certain types of contingencies that are appropriate to
provide third parties, there are other parts, there are other
types of contingencies that will, should be maintained and held
by the government.
Mr. Lipinski. So you are saying, though, that the two
different--using both of those types of contingencies should be
allowable, but you are making the distinction as where it is
going to be, the government is going to hold it or it is going
to go directly to the third party?
Ms. Lerner. If the government holds it, there is not a
question of allowability. Allowability is an issue when you are
dealing with third parties. So what we are talking about there,
when you are dealing with contingent expenses, there is a
spectrum. There are unknowns, and the spectrum runs from your
known unknowns to your unknown unknowns, and the position that
the FAR takes is your known unknowns you can put in a proposal
or in a cost estimate because they are known with sufficient
clarity, and you are capable of deriving necessary supporting
data that the risk associated with providing those funds to
third parties is outweighed by the clarity that you have. So
known unknowns can be provided to a third party.
Unknown unknowns the government can identify them, the
government can set aside funds for them, but the government
needs to hold those funds and provide them to the third party
when the contingent events achieve the type of clarity that
would enable them to be supported by the necessary cost data
and be consistent with the principle.
So the idea is not that you cannot use government money for
both types of contingencies. It is just when can you give the
money to people outside the government, and the position of the
FAR, and I think indirectly the position that is in the current
cost principle, is that the only types of contingencies, costs
associated with contingencies that can go outside of the
Federal Government are ones that are known with sufficient
accuracy to ensure that they can be supported, that they are
consistent with the definition and that they can be supported
by cost data.
Mr. Lipinski. Now, the proposed language, new language, are
you saying that still does not address that?
Ms. Lerner. The new language does require that, to the best
of my recollection, it does require that the contingent amounts
be supported by verifiable supporting data, and so it does make
a requirement that DCAA would say we have not been able to see
in any of the audits that we looked at. In each of the audits
that DCAA conducted, and they have asked repeatedly over the
course of almost three years in some of these audits DCAA, has
not been able to find the type of supporting data that they
would want to see to accept those costs.
So there is a requirement in the proposed definition, that
the costs be supported by verifiable supporting, data and that
makes sense to me.
And the other statements that contingency is a necessary
part of budget formulation are not inconsistent with the
position that we have been taking. Our position has been not
that the government can't think about contingencies when it
makes its budgets for an award, but that the problem arises
when you want to provide money to third parties for
contingencies. And that money has to be consistent with the
cost principle and supported.
Mr. Lipinski. Well, if the chairman will allow me to follow
up just one thing. The DCAA is in the business of auditing
contracts, MREFC Projects are cooperative agreements. So is
DCAA in the business of auditing cooperatives' agreements, and
does this cause a problem when you are looking at what DCAA is
looking at in an audit because it is a cooperative agreement
and not a contract?
Ms. Lerner. No. That is not a problem. DCAA does audit some
cooperative agreements. They are in the business primarily of
looking at contracts, but they also routinely do look at
cooperative agreements for us.
Mr. Lipinski. All right. My time is well past. I will yield
back right now.
Chairman Brooks. The Chair recognizes Mr. Bucshon from the
great State of Indiana.
Mr. Bucshon. Thank you, Mr. Chairman. Do you believe that
staffing constraints are a major impediment to achieving better
grant and contract administration?
Ms. Lerner. I certainly believe that that is the position
that NSF has taken. I think that in an ideal world for the
oversight that NSF conducts that they would prefer to have more
people. I think we are obviously pretty far from an ideal
world, and so we have to look at ways of working smarter and
working within the staff that we currently have. We have
recommended to NSF that they use the process that they have for
coming up with the number of staff they would like to have to
simultaneously look at the business processes and identify
opportunities for doing things differently and make do in these
leaner times.
Mr. Bucshon. Do you think they could be more effective? Are
they doing a good job?
Ms. Lerner. I think they are doing what they can. They have
not been able to do as, you know, they planned in '10, and '11,
to do more on-site monitoring visits than they were able to do.
I think there are opportunities. We are not going to be in a
situation where money is going to be flowing like it was five
years ago. So we have to look at things like virtual site
visits: the staff at BVFA has been conducting some pilots of
virtual site visits, which are a great idea if we are not going
to be able to put people on a plane and get out there. I think
there are things that we can do with data analytics,
particularly when NSF moves to a new financial management
system that will enable us to do more from our seats in
Ballston and oversee funds better.
Mr. Bucshon. Okay. You testified that the NSF canceled six
site visits to monitor high-risk awardees in fiscal year 2010,
and fiscal year 2011. How many site visits does the office do a
year approximately?
Ms. Lerner. I think they had planned to do 30 in one year
and 32 in the other, and they canceled six. So obviously even
when they do the site visits, they are only able to get out and
touch a very small number of institutions. That is why it is
even more important to develop, I think, a data analytics
capacity and the ability to do more work from the desks at NSF
to stay on top of where money is going.
Mr. Bucshon. Okay. Are there any major challenges you face
as Inspector General when working with the management at NSF?
Ms. Lerner. Ultimately I have found NSF management very
open to the issues that we are raising, even if sometimes they
don't want to hear, and don't like what I am saying. They do
listen, and we have established strong working relationships
with the folks both on the program side and in the directorates
as we attempt to grapple with issues like audit resolution and
with the contingency issues.
We certainly, as you can see, are pretty far apart on the
issue of contingencies, but everyone is talking, everyone is
trying to work productively on it, and I do think that we will
see progress on that.
Mr. Bucshon. Okay, and what happens if the Foundation
doesn't agree with OIG recommendations?
Ms. Lerner. There is a process for audit resolution. We
make the recommendation: we can't force the Foundation to do
anything. The recommendation goes into the audit resolution
process, and if we can't work out a way of resolving an issue
that we both agree on, then the issue can be raised to an audit
resolution official. NSF makes its pitch for the outcome that
it believes is necessary, our office makes a pitch for what we
believe is necessary, and ultimately the audit resolution
official makes a determination for the agency.
Mr. Bucshon. I yield back, Mr. Chairman.
Chairman Brooks. Thank you, Mr. Bucshon.
The Chair next recognizes Ms. Bonamici from the great State
of Oregon.
Ms. Bonamici. Thank you very much, Mr. Chair.
Ms. Lerner, I want to ask you about some, another workforce
management issue you raised in your testimony, and that is the
use of and costs associated with and challenges associated with
the temporary employees under the Intergovernmental Personnel
Act. And it appears that the last audit done of costs
associated with the use of IPAs was in 2004.
So if you could talk, that is what you mentioned in your
testimony. If you could review for us what recommendations
might have been made in that 2004 report and what changes,
steps you have taken since then with respect to the IPAs, and
perhaps as you are talking about that, if you want to mention
or touch on some of the issues that you raised in your
testimony as being cost concerns including the possibility that
salaries can exceed the maximum federal pay limits, the cost of
the IPA's home institutions fringe benefit packages which NSF
pays, and the lost consultant income.
Ms. Lerner. Certainly. Our office back in 2004 did look at,
and attempt to identify the incremental costs, the added costs
of having visiting personnel at NSF. There are two types of
visiting personnel; those there pursuant to the
Intergovernmental Personnel Act, that do have extra dollars
associated, and those through the Visiting Scientists,
Engineers, and Educators' Program, which do not have the same
costs associated with it, with the exception of R&D-related
costs.
What we found in 2004 was that the NSF, when an IPA comes
on board, NSF pays the salary that the IPA receives at the home
institution, which in some instances can exceed the maximum
amount a federal employee would receive. They also cover the
fringe benefits that are paid by the institution. So that is an
added cost, and finally, there are payments made for lost
consulting to IPAs, and when we looked at 147 IPAs in 2004,
those incremental costs amounted to $1.3 million.
There is also another $1.1 million associated with IR&D
travel--the Individual Research and Development travel, and
that is money to allow both the IPAs and the folks who come to
NSF under VSEE appointments, and career employees, to maintain
active research programs while they are at NSF. So those costs
added another $1.1 million.
We did a very thorough analysis of the way that the dollar
amounts were calculated and identified some difficulties NSF
was having in calculating some of the amounts for IPAs and made
recommendations to NSF to improve its calculations. And our
plan this year is to hopefully this summer to do an update of
that job to look again to identify the incremental costs
associated with IPAs because the number of IPAs has gone up at
NSF since 2004, and to see the progress that the agency made
implementing the recommendations that we made in 2004, and
whether there are any other issues that we want to bring to
their attention about those costs at this point.
Ms. Bonamici. Thank you, and I know that the committee
would want to know the results of that as you are working on
that.
Would you foresee any significant risks to NSF in
attracting top talent if some of these issues are limited or
reduced or modified?
Ms. Lerner. There is a balance to be struck and I know
certainly that there are people who would be very concerned
that if we don't continue to do things the way that we have
been doing, that we will have an even more difficult time
attracting people to come to NSF as IPAs. And that is a
concern, but we also are at a point where I think every dollar
that we spend has to be examined and examined rigorously, and
there needs to be a really strong cost benefit analysis done
when we decide to spend money, and we shouldn't just keep
spending it the way we have been spending it because that is
the way we spent it.
Ms. Bonamici. Thank you. We appreciate that.
And you mentioned the number of IPAs in 2004, and said that
the number has gone up. Do you happen to know how many are----
Ms. Lerner. I believe when we conducted our IR&D report,
the number was up to 314.
Ms. Bonamici. Thank you.
Ms. Lerner. Uh-huh.
Ms. Bonamici. Thank you. I yield back. Thank you, Mr.
Chair.
Chairman Brooks. The Chair is going to, given our time, go
ahead and open up for a second round of questions. I am going
to have to go to the House Armed Services Committee hearing as
soon as I finish with my round, and I am going to turn the
gavel over to Mr. Bucshon.
I am going to follow up on something that Mr. Bucshon
brought up, and I am focused on page two of your written
testimony entitled, ``Grants management.'' ``Our audits of
National Science Foundation's operations have found that NSF
needs to continue to improve the grant management activities,
including the oversight, of awardees financial accountability,
programmatic performance, and compliance with applicable
federal and NSF requirements. NSF has indicated that staffing
constraints cause it to reduce the number of site visits to
monitor high-risk awardees. In both fiscal year 2010 and fiscal
year 2011, six planned site visits were cancelled. NSF had
planned to conduct 30 site visits in fiscal year 2010, and 32
in fiscal year 2011. NSF also stated that its increased
workload has impacted its ability to resolve audit
recommendations in a timely fashion. For example, the number of
audit reports with questioned costs that were not resolved
within six months grew from zero in fiscal year 2003 to 26 in
fiscal year 2010. Resolving questioned costs swiftly is an
important component of grants managements that funds can be
returned to the Federal Government and also so that financial
management deficiencies can be addressed before additional
funds are placed at risk.''
In reviewing these two items, one about site visits and the
other is resolution of audit recommendations, the NSF seems to
focus on the lack of adequate personnel. Who is it that makes
the decision how many personnel the National Science Foundation
will dedicate to site visits and audit recommendation
resolutions?
Ms. Lerner. The BFA thinks that it does an analysis and
makes recommendations to the director and the deputy director
and my understanding is that the determination as to the
amounts that will be available for staffing in the individual
units is--those decisions are made by the director and the
deputy director.
Chairman Brooks. So if the staffing decisions are made by
the director and the deputy director, what is your reaction to
the NSF's response that they are not able to do the needed site
revisits, that we have these delays, and we are not able to
timely resolve audit recommendations?
Ms. Lerner. If we can't hire more people, then we have to
look at how we work and find ways to work more efficiently and
more effectively with the staff that we do have, and that may
mean that some things that we have done in the past that are of
a lesser priority we don't do, and we shift focus to things
that are of higher priority. We utilize the capacity of virtual
site visits as opposed to boots on deck site visits. We utilize
the information that is in our financial management systems to
stay on top of how money is being spent more effectively. There
are changes that can be made to processes when you can't add
people that can increase the effectiveness of monitoring.
Chairman Brooks. Well, if the NSF director and deputy
director are not going to hire the additional personnel in
order to do the required site visits or to timely resolve audit
recommendations, do you have any explanation for why they have
not been implementing the efficiencies that you just described?
Ms. Lerner. We have recommended that they do precisely
that. They have a fairly robust process that they use for
determining the staff that they would need, and that same
process can be used for looking, for assessing systems and
processes and identifying changes that can enable them to work
more efficiently and effectively, and we--they haven't been
utilizing that aspect of the process for that reason, and we
have recommended that they do that moving forward.
Chairman Brooks. Oh, I understand your recommendation. Do
you have an explanation for why your recommendation has not
been implemented?
Ms. Lerner. Well, we just made the recommendation in the
past couple of months, so it does take some time for them to
implement it. They were receptive to the recommendation, and my
hope is that moving forward they will do precisely what we have
asked them to do.
Chairman Brooks. And in the alternative the director and
deputy director could hire the additional personnel. That is
another mechanism for ensuring timely site visits, adequate
number of site visits, proper resolution of these audit
recommendations. Have you received any explanation from the
National Science Foundation as to why if they are going to
assert that they need personnel, they don't reallocate some
resources to the personnel that are needed?
Ms. Lerner. It has always been a desire at NSF to put as
much money as one can out to do science and to keep
administrative costs as low as possible, but I believe we are
at a point where investments and administrative operations are
necessary in order to ensure appropriate stewardship of NSF
funds. We have to balance the programmatic responsibilities and
the stewardship obligations that we have for federal funds.
Chairman Brooks. Well, thank you, Ms. Lerner. Again, I
apologize for having to leave, but I have House Armed Services
Committee markup for the National Defense Authorization Act,
and it would be good if I could listen to some of the debate
before I vote on the amendments pertaining to that debate.
So at this time I am going to turn the chair and the gavel
over to Mr. Bucshon from Indiana.
Mr. Bucshon. [Presiding] Mr. Lipinski.
Mr. Lipinski. Thank you. I just wanted to briefly follow up
on what the chairman has just been questioning you about. I
know an issue--I just wanted to say--I don't have a question, I
just wanted to say that I know that NSF's operations or
administration funding has been flat and that Ms. Lerner said
they want to keep the money to, going to the research, but it
is also the case that they have been told that is where the
money is going to because that is a separate account so that
could be an issue with NSF being able to do more work, not
having the funding for the staffing to do that in operations.
I want to come back to, I think probably briefly, to the
question that we were talking about before about contingency
funds. It seems like there is still some confusion over this,
and you said you had--were talking to NSF about this. I know
NSF, what you had said in response to one of my questions
before was about the known unknowns being, and hopefully I get
this right, throwing the knowns and unknowns together, which
way they go, the known unknowns were part of contingency funds,
and I believe the NSF believes those are part of the base
money. They are not contingency funds. It is the unknown
unknowns only that are part of contingency.
But I don't think we are going to get anywhere on that
right here. That is something that needs to be continued to be
worked out and hopefully we will have the new language from OMB
will, the comment period is going to be ending soon. Hopefully
we will have that done and finalized.
But following on that, do you think that it is, might be
the--I am not sure how to put this but might be a good idea to
hold off on audits, any further audits until this is all
settled in terms of what the rules are going to be, and
certainly I encourage you to keep working with NSF on that end
of it, but you also do have the rules OMB is laying out. It
would seem to me that perhaps there shouldn't be any more
audits.
I mean, are there more audits that are going to, new audits
that are going to move forward even though there is still sort
of these questions that we have about what contingency funds
are, what they are going to be under the new rules? So I just
wanted to see what you had to say about that.
Ms. Lerner. Certainly. We do have ongoing work focusing on
contingencies, and I take your point that there is a process
going on with the OMB, and one of the issues being considered
is a change in the definition of contingency. But the time I
don't have a crystal ball, and I have no way of knowing how
long it will take for that particular issue to be resolved, if
ever, through this process.
So from our perspective we still have an obligation to
conduct our oversight work in accordance with the existing
provisions of the circulars. But the work that we have ongoing
right now, we have a project looking at a closed NSF awards. We
wanted to pick an award where there were contingencies that was
closed and examine NSF's management of contingencies over the
lifecycle of that award. We have an ongoing audit in progress
looking at that, and we are hoping to have a draft out of what
we found there in June.
We are also looking to coordinate with other federal
agencies that deal with contingencies and construction
projects, including the Department of Energy and the Department
of Housing and Urban Development to get around the table and
talk about how all of us who have to deal with these types of
contingencies and construction projects handle them so that we
can be in a position to provide insight to OMB as it moves
forward in its process and to identify best practices in one or
all of the offices that could position all of us to manage
contingencies better. So we have that in progress as well.
And, we will also be looking through the course of some of
our other broader audits that will have a component looking at
contingency cost as well. It won't be the sole purpose of some
of the audits, but it will be one issue that is examined.
Mr. Lipinski. All right. Thank you. I yield back.
Mr. Bucshon. Mr. Palazzo from Mississippi.
Mr. Palazzo. Thank you, Mr. Chairman.
Ms. Lerner, in your tenure as NSF Inspector General, what
is the total amount of money that you recovered on behalf of
the American taxpayer?
Ms. Lerner. I think it is noted in the written testimony
from an investigative standpoint in the three years that I have
been at NSF we have recovered $21.6 million in fines, civil
recoveries, and restitutions. From the audit perspective we
have identified $241.6 million in questioned costs and funds
put to better use for a total amount of $263.2 million.
Mr. Palazzo. The next OIG report to Congress should be
available within the next month. Will there be any major new
issues, either investigative or audit wise, that will be of
particular interest to this committee?
Ms. Lerner. I think you will see more about contingencies
in there. You will see more small, SBIR Program cases. You will
see a lot of what you have seen before. No major surprises and
no magicians.
Mr. Palazzo. Now, I agree with your testimony that
awardees, mostly universities, must better monitor their sub-
awardees----
Ms. Lerner. Uh-huh.
Mr. Palazzo. --mostly principle investigators and their
staff and students to ensure federal money is being used
appropriately. Do you believe NSF is doing a good job with this
oversight of this issue? What could they do better? And what
are your recommendations for assuring that these awardees take
their role as stewards of American taxpayer dollars seriously?
Ms. Lerner. I think NSF is challenged in this area. Again,
because of some of the reasons that we have talked about
previously, but in 2004, it set up a program called Award
Against--let me make sure I get the acronym correct. AMBAP,
Advanced Business Monitoring Processes that it uses to go to
institutions and ensure that they have systems set up in order
to properly manage NSF funds, and one of the issues that they
look at is sub-recipient monitoring. You know, obviously I
would like to see more virtual site visits because the more we
are able to touch people, the more likely it is that they will
understand and do what they need to do, and we can touch a lot
more people virtually than we can by putting some people on a
plane.
So I think that increasing our ability to do virtual site
visits and getting to a point where we have a better accounting
system and can stay on top of the funds as they are drawn down
by institutions will make NSF's job easier there.
Mr. Palazzo. How many staff members do you employ in your
audit and oversight function?
Ms. Lerner. In the audit and oversight function?
Mr. Palazzo. Or----
Ms. Lerner. In total
Mr. Palazzo. --in your total, not NSF, but in your total
sphere.
Ms. Lerner. The number varies because we have a lot of
interns that come in and out in the summer, but I think it is
approximately 76 people.
Mr. Palazzo. Seventy-six and do you have contractors?
Ms. Lerner. We do have contractors as well.
Mr. Palazzo. What do they do?
Ms. Lerner. We contract out mini audits both to DCAA and to
private sector accounting firms.
Mr. Palazzo. So you do use accounting firms----
Ms. Lerner. Yeah.
Mr. Palazzo. --CPA firms----
Ms. Lerner. Yes.
Mr. Palazzo. --to do that?
Ms. Lerner. We are hoping to transition more of that work
in-house but it takes time to develop the staff who have been
overseeing to actually do the work. So we are moving to do
that.
Mr. Palazzo. If you have an auditor that does substandard
work, do you all have any kind of forms of being able to hold
them accountable?
Ms. Lerner. You mean a staff person or an accounting firm
that does substandard work?
Mr. Palazzo. Well, I will give you----
Ms. Lerner. Yes to both.
Mr. Palazzo. Okay. I will give you a little example. You
mentioned Department of Housing and Urban Development. They
have a great system through their React Financial System to
where----
Ms. Lerner. Uh-huh.
Mr. Palazzo. --you know, every housing authority has to
have an independent public audit, and if--and they have--and it
is pretty much designed through--everything is reported
electronically.
Ms. Lerner. Uh-huh.
Mr. Palazzo. But they have, I guess just like the IRS has
flags, if they see something that is funny on your tax return,
you might get a notice automatically, and you got to provide
them with information. Well, the same thing goes for CPA firms.
You can assume probably based on the historical data that not
every awardee is going to be without some form of findings.
Ms. Lerner. Uh-huh.
Mr. Palazzo. And if you have all the sudden, and I don't
know since you are contracting, these people work directly for
you instead of the awardees, it may be different, so I was just
curious about that, and I think the better use of, I mean, as a
CPA----
Ms. Lerner. Uh-huh.
Mr. Palazzo. --and a former firm owner who has conducted
audits, you know, you might want to have a good balance between
those contractors who, you know, that is what they do, they do
the training, but if you could hold them accountable somehow so
that they are doing good audits for you, that would be great.
Ms. Lerner. Absolutely, and we do, we have staff who
oversee all the contractors who work for us very carefully so
that we can have comfort in the work that they do. We are very
vigorous in our oversight there.
We are also vigorous in our oversight of the contractors
that do A-133 or Single Audit Act work for institutions because
some people do good work, and some people do subpar work, and
we do our level best to monitor and find the bad apples and get
them out of the system.
Mr. Palazzo. Yes. I am definitely over my time. Thank you,
Chairman, and when you mentioned yellow book audits and single
audits, those--if you are a CPA firm offering those, you don't
just do one or two a year. That becomes your niche because it
is highly specified.
So thank you for your testimony. Thank you, Mr. Chairman.
Mr. Bucshon. Thank you, Ms. Lerner. I agree that uniform
guidance needs to be in place for NSF food purchases, but your
testimony raises some other concerns, and I want to make sure
we understand it correctly.
Ms. Lerner. Sure.
Mr. Bucshon. You testified that in addition to the
delicious snacks so to speak NSF provides the ``merit review
panelists and others attending meetings at NSF,'' the panelists
and meeting attendees also receive $480 per meeting day, per
person to cover compensation and honorarium in addition to the
per diem. And this doesn't include the $280 they receive on
travel days.
How many merit review panelists and meeting attendees
receive this ``compensation'' and ``honorarium'' per year, and
under what authority, and at what cost to the taxpayer?
Ms. Lerner. I can tell you--there are some things I can
tell, there are some things I can't tell you. I can tell you
that in fiscal year 2010, there were approximately 15,000
individuals who served on panels for NSF. And the vast majority
of those in all likelihood received the amounts that you asked
about.
But I can't with precision tell you exactly, although that
is an area that we are considering looking at more closely.
The authority for all of these expenditures would arise
under a combination of NSF's Enabling Act, which authorizes it
to conduct merit review, and the governance and appropriations
statutes. I don't think from what I know of it right now that
there is a legal question per se as to whether NSF can do this,
but it should NSF be spending this money, especially when it
comes to honoraria at this time, is a fair question to ask.
Mr. Bucshon. I mean, do you believe personally that the
additional compensation is a responsible way to spend the
taxpayers' dollars?
Ms. Lerner. I think every dollar that NSF puts out right
now needs to be looked at carefully as I said earlier, and just
because we have done this in the past doesn't mean that we
should continue to do it now. I know there are people that will
say that we won't be able to attract people to do these panels
if we don't offer them an honoraria, but I think also that
there are a lot of intangible benefits that come from serving
on these panels.
So, I think that before a decision is made to continue
doing this, there ought to be a thorough study, and right now
times being what they are, I would think long and hard before
continuing to pay honoraria here.
Mr. Bucshon. I yield to Mr. Lipinski.
Mr. Lipinski. I just want to come back on that, the
question, and I know it is not really a question, but I just
wanted to make clear and get--make sure I am understanding this
correctly. The $480 per day is a--is that a flat daily rate
that includes travel, hotel, food, and expenses?
Ms. Lerner. It includes to my--lodging, per diem which
would be food, local travel, and an honorarium. Travel beyond
the local area when you are here is separate from that amount.
Mr. Lipinski. Okay. So that is--so 480 per day and then 280
on the travel days?
Ms. Lerner. Correct.
Mr. Lipinski. Okay. So, I mean, that is not all--an
honorarium and certainly, you know, I know I have never served
on one of these, but as someone who, as an academic and I knew
people who did, I certainly think there is--has to be some
incentive for people to come. You certainly don't want them
paying money out of their own pocket, I wouldn't think, for
doing this.
So, you know, I think we just need to be clear on what
exactly--how much money that this is.
Thank you.
Ms. Lerner. I do agree that no one should have to be paying
out of their own pocket for the privilege of serving on an NSF
merit review panel, but it is probably time for us to look at
those costs so that we can provide better information for NSF
management to make a decision moving forward about how to
handle those types of payments.
Mr. Lipinski. Thank you.
Ms. Lerner. Uh-huh.
Mr. Bucshon. Thank you, Ms. Lerner, for your testimony
today and the members for their questions.
Members of the subcommittee may have additional questions
for the witness, and we will ask that you respond to those in
writing. The record will remain open for two weeks for
additional comments from members.
The witness is excused, and the hearing is adjourned.
[Whereupon, at 3:37 p.m., the Subcommittee was adjourned.]
Appendix I
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Answers to Post-Hearing Questions
Answers to Post-Hearing Questions
Responses by Ms. Allison C. Lerner, Inspector General, National Science
Foundation
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