[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]







                     ENSURING THE BEST STEWARDSHIP
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                                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

                               __________

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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

 
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                         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.


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    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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