From: NASA Office of Inspector General
Posted: Tuesday, August 4, 2009
We found that NASA inappropriately approved, obligated, and partially expended more than $4 million of facility and administrative (F&A) costs because NASA grant officers in charge of the WJU agreements did not adequately review WJU's cost proposals. Specifically, the grant officers failed to note that WJU had included F&A costs as direct costs in its cost proposals to NASA. During our interviews with NASA grant officers assigned to review the WJU agreements, they stated that they were not sufficiently familiar with the definitions and allocation of direct and F&A costs to adequately exercise due diligence to ensure proposal costs were allowable, allocable, and reasonable under the Office of Management and Budget (OMB) Circular A-21, "Cost Principles for Educational Institutions" (Revised August 8, 2000) (Circular A-21).
According to Circular A-21, Direct costs can be identified specifically with a particular agreement project, an instructional activity, or other institutional activity, or can be directly assigned to such activities with a high degree of accuracy. F&A costs are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or other institutional activity. F&A costs are reimbursed to the institution on the basis of a negotiated and approved F&A rate that limits allocable administrative costs to 26 percent of modified total direct costs for educational agreements. By inappropriately approving F&A costs as direct costs, NASA could be reimbursing WJU for administrative costs in excess of the allocable Federal cap.
In addition, we determined that the NASA grant officers did not note that the cost proposal for one of the five agreements, with a total value of $271,164, contained $4,501 in duplicative labor costs. Specifically, for three WJU staff members, labor costs were included in two different areas of the proposal--100 percent of their salaries as individual staff members with specific responsibilities; and an additional 5 percent for two of the staff members and 35 percent for the other for "CET Management." Although the three individuals have dual roles within WJU, the grants officers should not have accepted WJU's proposal to charge more than 100 percent of their salaries to the NASA agreement.
In our June 26, 2009, draft of this memorandum, we recommended that the Assistant Administrator for Procurement provide NASA grant officers with training on Circular A-21 cost principles to assist them in identifying administrative service center costs. We also recommended that the Assistant Administrator for Procurement work with the Department of Health and Human Services, Division of Cost Allocation (the Federal agency responsible for negotiating and approving rates for F&A costs related to educational agreements) and renegotiate WJU's F&A rate for all Federal educational grants and cooperative agreements, to ensure that administrative costs do not exceed the allowable Federal reimbursement cap.
In commenting on the draft of this memorandum, the Assistant Administrator for Procurement concurred with our recommendations to provide NASA grant officers with training on Circular A-21 cost principles and to work with the Department of Health and Human Services to renegotiate WJU's F&A rate (see Enclosure 2). We consider management's proposed actions to be responsive. The recommendations are resolved and will be closed upon completion and verification of management's corrective action.
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