Sep 21 2011
National Aeronautics and Space Administration Office of Inspector General
NASA makes significant and sustained investments each year to fund scientific research, scholarships, fellowships, and educational activities in support of its mission. For example, over the past 5 years NASA has awarded approximately $3 billion in grants. In fiscal year (FY) 2010 alone, NASA awarded $569.8 million in grants. Given these large sums of money, it is imperative that NASA ensure its grants are properly administered and managed.
NASA does not have an adequate system of controls to ensure proper administration and management of its grant program. Specifically, we identified weaknesses in the announcement, administration, and oversight of Agency grants. For example, we found that NASA:
- awarded grants in lieu of contracts, contrary to Federal and NASA regulations and requirements;
- awarded grants and grant supplements contrary to NASA requirements governing unsolicited proposals;
- did not provide adequate oversight of grantee performance and expenditures; and
- awarded unauthorized and unallowable grant supplements contrary to Federal and NASA regulations.
The nature of the control weaknesses identified lead us to believe our findings reflect systemic deficiencies in the administration and management of NASA’s grant program (see Appendix C for a summary of the weaknesses by grant reviewed).
Oversight of the Grant Award Process. We found that grants awarded by the Centers do not receive independent oversight from the NSSC and are not otherwise subject to controls sufficient to validate the accuracy of the award instrument or appropriateness of the award. Specifically, we identified three grant supplements totaling $410,191 for which a contract would have been the more appropriate procurement instrument. Grants provide financial assistance to grantees for the independent completion of agreed-upon activities. In contrast, contracts are used to acquire property or services for the direct benefit or use of the Federal Government. For the three supplements we identified, contracts should have been used because the grantee performed personal services that otherwise would have been performed by NASA employees or contractors for the direct benefit of NASA. Because procurement contracts are subject to statutory and regulatory requirements that generally do not apply to grants, use of an incorrect procurement instrument could intentionally or inadvertently bypass competition and other legal requirements.
We also found that NASA grant officers at two Centers awarded $7.3 million in grants and grant supplements (43 percent of our sample) contrary to NASA requirements regarding unsolicited proposals. Specifically, grant officers at Goddard improperly awarded 12 grant supplements totaling $1.3 million to one grantee and a grant officer at Glenn improperly awarded $6 million for two education grants and 19 supplements to another grantee when, in both cases, proposals for the work should have been solicited from the public.
In the 20 years since the original grants were awarded to these two grantees, grant officers at Goddard and Glenn have routinely awarded related grants and grant supplements worth several million dollars to these two grantees for unsolicited proposals for work that was not new, unique, or innovative. We found that Center officials had direct involvement with the grantees prior to submission of the proposals, awarded grant supplements that were outside the scope of the original grant, and awarded grant supplements when a new grant should have been awarded. Because the two Centers did not follow NASA requirements governing unsolicited grant proposals they circumvented the competitive process and cannot be sure that they received the best value for NASA’s money.
Monitoring Grantees’ Performance. During the audit, we found internal control weaknesses in NASA’s monitoring of grantee performance. NASA Office of Procurement officials have issued minimal requirements to ensure that once grant funds are awarded, grant officers, technical officers, and finance officials perform appropriate oversight of the grantee’s financial and programmatic performance. While the Science Mission Directorate and the Headquarters Office of Education have established or are in the process of establishing internal controls to monitor grantee performance, they have no requirements to perform such common grant monitoring actions as desk reviews or site visits. Further, while NASA complies with Office of Management and Budget (OMB) Circular A-133, which requires that grantees have annual audits conducted when expenditures exceed $500,000, we believe it is unwise for NASA to rely on these audits as the sole means of monitoring grantee performance or identifying unallowable costs. In addition, we found NASA’s requirements concerning review of financial and program reports to be minimal at best. We believe the limited oversight currently provided by NASA officials is the reason we identified $7,031 in unauthorized or unallowable expenditures in the eight grants we reviewed (see Appendix D for details).
We also found that the NASA Grant and Cooperative Agreement Handbook (Handbook) issued by the Headquarters Office of Procurement provides that grantees may deviate from their proposed budgets without approval from NASA except when the change involves property, construction, or subcontract-related costs. In our view, this broad discretion to deviate from proposed budgets increases the risk that grantees will incur unauthorized or unallowable costs or expenditures unrelated to the purpose of the grant. For example, we found that one grantee paid employee tuition costs totaling $7,388 even though the tuition costs were not included in the budget approved by NASA.
During the course of our interviews, NASA technical officers said their reviews of grantee annual programmatic performance reports were necessarily cursory given their workload. Further, one Center grant officer equated grant funding with giving a “gift” to the grantee, which in our view means that once the funding is awarded the Agency’s oversight responsibilities are minimal. Based on such comments and the minimal internal controls, policies, and procedures in place for oversight of grantees, we conclude that NASA’s monitoring of grantee performance is inadequate.
Moreover, NASA’s limited efforts to monitor its grant awards differs markedly from that of other Federal granting agencies. For example, the Department of Justice’s Office of Justice Programs, which in FY 2010 awarded $3 billion in grants, requires annual grantee desk reviews and recommends that such reviews be conducted semiannually. The Government Accountability Office (GAO) stated that Federal grant-making agencies in general need to exercise effective oversight and implement internal controls to ensure that the goals of the grant are achieved and that funds are used for their intended purposes. Specifically, in June 2011 testimony before Congress, GAO testified that grant-making agencies need effective processes for, among other things, monitoring the financial management of grants and ensuring results through performance monitoring. In our view, conducting periodic, comprehensive reviews of information reported by grantees using desk reviews or site visits could reduce the level of noncompliance with grant requirements, thereby reducing the risk of fraud, waste, or abuse in NASA’s grant program.
Paul K. Martin