[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
NSF'S OVERSIGHT OF THE NEON PROJECT
AND OTHER MAJOR RESEARCH FACILITIES
DEVELOPED UNDER COOPERATIVE AGREEMENTS
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT &
SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 3, 2015
__________
Serial No. 114-4
__________
Printed for the use of the Committee on Science, Space, and Technology
Available via the World Wide Web: http://science.house.gov
_________
U.S. GOVERNMENT PUBLISHING OFFICE
93-882 PDF WASHINGTON : 2015
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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HON. LAMAR S. SMITH, Texas, Chair
FRANK D. LUCAS, Oklahoma EDDIE BERNICE JOHNSON, Texas
F. JAMES SENSENBRENNER, JR. ZOE LOFGREN, California
DANA ROHRABACHER, California DANIEL LIPINSKI, Illinois
RANDY NEUGEBAUER, Texas DONNA F. EDWARDS, Maryland
MICHAEL T. McCAUL SUZANNE BONAMICI, Oregon
STEVEN M. PALAZZO, Mississippi ERIC SWALWELL, California
MO BROOKS, Alabama ALAN GRAYSON, Florida
RANDY HULTGREN, Illinois AMI BERA, California
BILL POSEY, Florida ELIZABETH H. ESTY, Connecticut
THOMAS MASSIE, Kentucky MARC A. VEASEY, TEXAS
JIM BRIDENSTINE, Oklahoma KATHERINE M. CLARK, Massachusetts
RANDY K. WEBER, Texas DON S. BEYER, JR., Virginia
BILL JOHNSON, Ohio ED PERLMUTTER, Colorado
JOHN R. MOOLENAAR, Michigan PAUL TONKO, New York
STEVE KNIGHT, California MARK TAKANO, California
BRIAN BABIN, Texas BILL FOSTER, Illinois
BRUCE WESTERMAN, Arkansas
BARBARA COMSTOCK, Virginia
DAN NEWHOUSE, Washington
GARY PALMER, Alabama
BARRY LOUDERMILK, Georgia
------
Subcommittee on Oversight
HON. BARRY LOUDERMILK, Georgia, Chair
F. JAMES SENSENBRENNER, JR., DON BEYER, Virginia
Wisconsin ALAN GRAYSON, Florida
BILL POSEY, Florida ZOE LOFGREN, California
THOMAS MASSIE, Kentucky EDDIE BERNICE JOHNSON, Texas
JIM BRIDENSTINE, Oklahoma
BILL JOHNSON, Ohio
LAMAR S. SMITH, Texas
------
Subcommittee on Research and Technology
HON. BARBARA COMSTOCK, Virginia, Chair
FRANK LUCAS, Oklahoma DANIEL LIPINSKI, Illinois
MICHAEL T. McCAUL, Texas ELIZABETH ESTY, Connecticut
STEVEN M. PALAZZO, Mississippi KATHERINE CLARK, Massachusetts
RANDY HULTGREN, Illinois PAUL TONKO, New York
JOHN MOOLENAAR, Michigan SUZANNE BONAMICI, Oregon
STEVE KNIGHT, California ERIC SWALWELL, California
BRUCE WESTERMAN, Arkansas EDDIE BERNICE JOHNSON, Texas
GARY PALMER, Alabama
LAMAR S. SMITH, Texas
C O N T E N T S
February 3, 2015
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Barry Loudermilk, Chairman,
Subcommittee on Oversight, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 8
Written Statement............................................ 9
Statement by Representative Eddie Bernice Johnson, Ranking
Member, Committee on Science, Space, and Technology, U.S. House
of Representatives............................................. 10
Written Statement............................................ 12
Statement by Representative Lamar Smith, Chairman, Committee on
Science, Space, and Technology, U.S. House of Representatives.. 13
Written Statement............................................ 14
Witnesses
Dr. Richard Buckius, Chief Operating Officer, National Science
Foundation
Oral Statement............................................... 15
Written Statement............................................ 18
Dr. James P. Collins, Chairman, National Ecological Observatory
Network
Oral Statement............................................... 27
Written Statement............................................ 29
Ms. Kate Manuel, Legislative Attorney, Congressional Research
Service
Oral Statement............................................... 33
Written Statement............................................ 35
Discussion....................................................... 47
Appendix I: Answers to Post-Hearing Questions
Dr. Richard Buckius, Chief Operating Officer, National Science
Foundation..................................................... 64
Dr. James P. Collins, Chairman, National Ecological Observatory
Network........................................................ 117
Appendix II: Additional Material for the Record
Prepared statement by Representative Barbara Comstock,
Chairwoman, Subcommittee on Research and Technology, Committee
on Science, Space, and Technology, U.S. House of
Representatives................................................ 122
Prepared statement by Representative Elizabeth Esty, Committee on
Science, Space, and Technology, U.S. House of Representatives.. 123
Documents submitted by Representative Barbara Comstock,
Chairwoman, Subcommittee on Research and Technology, Committee
on Science, Space, and Technology, U.S. House of
Representatives................................................ 124
Documents submitted by Representative Barry Loudermilk, Chairman,
Subcommittee on Oversight, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 127
NSF'S OVERSIGHT OF THE NEON PROJECT
AND OTHER MAJOR RESEARCH FACILITIES
DEVELOPED UNDER COOPERATIVE AGREEMENTS
----------
TUESDAY, FEBRUARY 3, 2015
House of Representatives,
Subcommittee on Oversight and Subcommittee on
Research and Technology,
Committee on Science, Space, and Technology,
Washington, D.C.
The Subcommittees met, pursuant to call, at 10:04 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Barry
Loudermilk [Chairman of the Subcommittee on Oversight]
presiding.
[GRAPHIC] [TIFF OMITTED]
Chairman Loudermilk. The Subcommittee on Oversight and the
Subcommittee on Research and Technology will come to order.
Without objection, the Chair is authorized to declare a
recess of the Subcommittee at any time.
Good morning. Welcome to today's hearing titled ``National
Science Foundation's Oversight of the NEON Project and Other
Major Research Facilities Developed under Cooperative
Agreements.''
Without objection, the Chair authorizes the participation
of Ranking Member Johnson, Ms. Bonamici, Mr. Grayson, Mr. Bera,
Ms. Esty, Ms. Clark and Mr. Beyer for today's hearing.
In front of you are packets containing the written
testimony, biographies, and Truth in Testimony disclosures for
today's witnesses.
I recognize myself for five minutes for an opening
statement.
Good morning. First, I want to thank our witnesses for
being here today. I am looking forward to hearing from each of
you on this very important matter.
We are here today to discuss the National Science
Foundation's oversight of the National Ecological Observatory
Network, also known as the NEON Project, and other major
research facilities developed under cooperative agreements.
The NSF funds a variety of large research projects,
including multi-user research facilities, tools for research
and education, and distributed instrumentation networks. In
December, the House Science, Space, and Technology Committee
held a hearing regarding one of these large research projects,
the NEON Project, after learning about the mismanagement of
appropriated funds.
Specifically, the hearing discussed the findings of two
financial audits of NEON conducted by the National Science
Foundation's Office of Inspector General and the Defense
Contract Audit Agency. One of those audits discovered that NEON
was allowed to use federal money for explicitly unallowable
costs, including liquor, lobbying, and a lavish holiday party.
Both audits of the NEON Project were initiated by the NSF
Office of the Inspector General due to concerns about the lack
of NSF's review of costs and accounting financial controls of
major research facilities prior to entering into cooperative
agreements. In fact, during its first audit in 2011, DCAA had
to suspend its audit temporarily as the information supplied by
NEON was inadequate to complete the necessary financial
analyses. Of the proposed $433.72 million project cost, DCAA
identified approximately $102 million of these costs as
questionable and identified an additional $52 million of
proposed costs as unsupportable.
The final version of the first DCAA audit was transmitted
to the National Science Foundation in 2012, accompanied by an
NSF Office of Inspector General written alert about the
excessive costs and accounting deficiencies for major research
facilities.
A second audit of the NEON Project, which was completed in
October of 2014, revealed that NSF approved management fees,
which included paying $375,000 for lobbying, $25,000 for a
holiday party, and $11,000 a year for coffee services. In
addition, according to an October 2014 NSF letter to Senators
Grassley and Paul, NEON isn't the only cooperative agreement
receiving such fees. If one project can get away with this, how
do we know they aren't all frivolously spending hard-earned
taxpayer dollars?
As a small business owner and former director of a
nonprofit, I wholeheartedly understand the importance of
accountability. The fact that a nonprofit can treat American
taxpayer dollars as profit without any kind of consequences is
absolutely inexcusable. What is even more inexcusable is that
NSF has received warnings about this kind of irresponsible
spending over the past four years and has not taken adequate
measures to resolve the matter. I am not only interested in
learning about how the federal government can and needs to do a
better job with transparency and accountability, but also how
we can ensure that this kind of negligence is not occurring
with other cooperative agreements.
Taxpayer money should be spent in a responsible way with
the help of efficient management and oversight. If there are
loopholes out there allowing this type of unethical spending to
occur, then we need to get down to the bottom of it and make
sure that it can no longer happen.
I look forward to today's hearing, which I anticipate will
inform us on how these types of questionable expenses were
charged to the American people. In the end, though, I hope that
this hearing will inform us on how to provide better oversight
and management of federally funded research projects to ensure
that taxpayers can trust us with their money and know that it
will be spent in the manner intended.
[The prepared statement of Mr. Loudermilk follows:]
Prepared Statement of Subcommittee on Oversight
Chairman Barry Loudermilk
Good morning. First I want to thank our witnesses for being here
today. I am looking forward to hearing from each of you on this very
important matter.
We are here today to discuss the National Science Foundation's
(NSF) oversight of the National Ecological Observatory Network, also
known as the NEON Project, and other major research facilities
developed under cooperative agreements.
The NSF funds a variety of large research projects, including
multi-user research facilities, tools for research and education, and
distributed instrumentation networks. In December, the House Science,
Space, and Technology Committee held a hearing regarding one of these
large research projects, the NEON Project, after learning about the
mismanagement of appropriated funds. Specifically, the hearing
discussed the findings of two financial audits of NEON conducted by the
National Science Foundation's (NSF) Office ofInspector General (OIG)
and the Defense Contract Audit Agency (DCAA). One of those audits
discovered that NEON was allowed to use federal money for explicitly
unallowable costs, including liquor, lobbying, and a lavish holiday
party.
Both audits of the NEON Project were initiated by the NSF Office of
the Inspector General due to concerns about the lack of NSF's review of
costs and accounting financial controls of major research facilities
prior to entering into cooperative agreements. In fact, during its
first audit in 2011, DCAA had to suspend its audit temporarily as the
information supplied by NEON was inadequate to complete the necessary
financial analyses.
Of the proposed $433.72 million project cost, DCAA identified
approximately $102 million of these costs as ``questionable'' and
identified an additional $52 million of proposed costs as
``unsupportable.'' The final version of the first DCAA audit was
transmitted to NSF in 2012, accompanied by an NSF OIG written alert
about excessive costs and accounting deficiencies for major research
facilities.
A second audit of the NEON Project, which was completed in October
of 2014, revealed that NSF approved management fees, which included
paying $375,000 for lobbying, $25,000 for a holiday party, and $11,000
a year for coffee services. In addition, according to an October 2014
NSF letter to Senators Grassley and Paul, NEON isn't the only
cooperative agreement receiving such fees. If one project can get away
with this, how do we know they aren't all frivolously spending hard-
earned taxpayer dollars?
As a small business owner and former director of a non-profit, I
wholeheartedly understand the importance of accountability. The fact
that a non-profit can treat American taxpayer dollars as profit without
any kind of consequences is absolutely inexcusable. What is even more
inexcusable is that NSF has received warnings about this kind of
irresponsible spending over the past four years, and it has not taken
adequate measures to resolve the matter.
I am not only interested in learning about how the federal
government can--and needs to--do a better job with transparency and
accountability, but also how we can ensure that this kind of negligence
is not occurring with other cooperative agreements. Taxpayer money
should be spent in a responsible way with the help of efficient
management and oversight. If there are loopholes out there allowing
this type of unethical spending to occur, then we need to get down to
the bottom of it and make sure that it can no longer happen.
I look forward to today's hearing, which I anticipate will inform
us on how these types of questionable expenses were charged to the
American people. In the end, though, I hope that this hearing will
inform us on how to provide better oversight and management of
federally-funded research projects to ensure that taxpayers can trust
us with their money and know that it will be spent in the manner
intended.
Chairman Loudermilk. I now recognize the Ranking Member,
the gentlelady from Texas, for an opening statement.
Ms. Johnson of Texas. Thank you, Mr. Chairman. Before I
begin my formal statement, I simply want to say that as of this
morning, we have two additional Members assigned to this
Committee, so we will be able to organize later this week, and
we will be ready to act as Subcommittees.
Let me thank you, and I want to start by saying that I join
all my colleagues in expressing my dismay that NEON used its
management fee to pay for lobbying and alcohol and employee
morale. I think we can all agree that we cannot support these
actions. I also want to recognize NSF and NEON for adopting
reasonable limits on what their management fee can be spent on
going forward.
There is no doubt that some of my colleagues see advantage
in the negative headlines that have come with the NEON story
because they can point to those confused claims as evidence
that NSF is not a careful steward of taxpayers' dollars. This
situation might even be viewed by some as justifying the
Chairman's continued effort to question peer-reviewed NSF
grants for studies that the Chairman thinks sound funny.
That said, I want us all to fully appreciate where the
pursuit of NEON may lead. Across the government, management
fees have always been treated the same as profit--that is, they
are the company's money. In that regard, I would note that our
staff contacted GAO when we were seeking a witness because GAO
is expert on contract matters. However, staff found that when
it came to fees and their uses, the GAO had nothing to say
because they do not audit fees or profits. So if we are going
to move the goal line for NEON and start asking how their fee
can be spent and who controls it, we are on a path to tackle
the broader question of what everyone else who does business
with the federal government does with their fees and their
profits.
For example, major defense contractors do the great
majority of their business with the federal government. These
same companies spend tens of millions of dollars annually on
lobbying. The amounts they spend daily on lobbying dwarf the
amounts that NEON spent in an entire year. If we are serious
about ending such activities, we would have to introduce a bill
to put significant restrictions on all companies' federal
profits and fees. We would adopt such a law if we are serious
about this issue, but I suspect that our outrage is going to
begin and end with this one little environmental nonprofit.
I also want to point out the absurdity of being outraged at
NEON for using their fee to pay for unallowable costs. That is
because under the guidance for management fees, OMB makes clear
that, by definition, fees can only be used for unallowable
costs. Thus, the idea that NSF and NEON colluded to defraud the
government into paying for unallowable costs by establishing a
fee would implicate contracting officers all the way back to
the Kennedy Administration at agencies across the government.
Essentially, the NSF Inspector General has made a referral to
Justice calling for criminal prosecution of NSF and NEON
employees for doing exactly what the law permits them to do. It
is hard to see how that represents fraud.
The management fee represents less than one-half a percent
of the contract costs of the NEON project. The bigger
questions--and bigger money--are associated with whether NSF
has appropriate policies to estimate project costs, including
contingency costs, and whether these policies are consistent
with OMB guidance.
The NSF IG questions the use of contingency and the way the
cost estimate on NEON--and every other major equipment project
at NSF--was done. NSF disagrees. As Dr. Buckius will testify,
they have gone through the extensive audit disposition and
appeal process as laid out at NSF. Having adopted reforms, they
feel they are fully consistent with OMB's expectations for how
to manage risk and estimate costs. A plain reading of OMB's
updated regulations unambiguously supports NSF's position. Yet
the IG continues to make every effort to have her views
adopted.
To put it mildly, this situation is unfortunate, and it is
demoralizing to the agency's hardworking staff. But this
Committee is not equipped to solve any of this today. The
National Science Board, the Foundation's oversight board, is
aware of these issues and has a good understanding of them. I
hope that the Board will consider a careful review of NSF's
practices and policies with respect to large facilities. If the
Board identifies legitimate facilities management and oversight
concerns, I would be happy to join my colleagues in
appropriately addressing those concerns.
In the meantime, I intend to send a letter to GAO asking
for a review of how agencies estimate costs for major R&D
construction projects and how they set and manage contingency.
GAO should look first at how NSF does it, and then provide some
comparison as to how other agencies do the same things. Perhaps
GAO can help settle the impasse at NSF.
In closing, I hope we can keep our rhetoric and our actions
today measured and based on fact, and be clear that the issues
to be considered, if we are serious, go far beyond one small
environmental nonprofit's use of their fees.
And with that, Mr. Chairman, I yield back.
[The prepared statement of Ms. Johnson of Texas follows:]
Prepared Statement of Committee on Science, Space, and Technology
Ranking Member Eddie Bernice Johnson
Thank you Mr. Chairman, I want to start by saying that I join all
my colleagues in expressing my dismay that NEON used its management fee
to pay for lobbying and alcohol and employee morale. I think we can all
agree that we cannot support these actions. I also want to recognize
NSF and NEON for adopting reasonable limits on what their management
fee can be spent on going forward.
There is no doubt that some of my colleagues see advantage in the
negative headlines that have come with the NEON story because they can
point to those confused claims as evidence that NSF is not a careful
steward of taxpayer dollars. This situation might even be viewed by
some as justifying the Chairman's continued effort to question peer-
reviewed NSF grants for studies that the Chairman thinks sound funny.
That said, I want us all to fully appreciate where the pursuit of
NEON may lead. Across the government, management fees have always been
treated the same as a profit--that is, they are the company's money. In
that regard, I would note that our staff contacted GAO when we were
seeking a witness because GAO is expert on contract matters. However,
staff found that when it came to fees and their uses, the GAO had
nothing to say because they do not audit fees or profits.
So if we are going to move the goal line for NEON and start asking
how their fee can be spent and who controls it, we are on a path to
tackle the broader question of what everyone else who does business
with the federal government does with their fees and profits. For
example, major defense contractors do the great majority of their
business with the federal government. Those same companies spend tens
of millions of dollars annually on lobbying. The amounts they spend
daily on lobbying dwarf the amounts that NEON spent in an entire year.
If we are serious about ending such activities, we would have to
introduce a bill to put significant restrictions on all companies'
federal profits and fees. We could adopt such a law if we are serious
about this issue, but I suspect our outrage is going to begin and end
with this one little environmental non-profit.
I also want to point out the absurdity of being outraged at NEON
for using their fee to pay for unallowable costs. That is because under
the guidance for management fees, OMB makes clear that--by definition--
fees can ONLY be used for unallowable costs.
Thus, the idea that NSF and NEON colluded to defraud the government
into paying for unallowable costs by establishing a fee would implicate
contracting officers all the way back to the Kennedy Administration at
agencies across the government. Essentially, the NSF Inspector General
has made a referral to Justice calling for criminal prosecution of NSF
and NEON employees for doing exactly what the law permits them to do.
It is hard to see how that represents fraud.
The management fee represents less than 1/2 a percent of the
contract costs of the NEON project. The bigger questions--and bigger
money--are associated with whether NSF has appropriate policies to
estimate project costs, including contingency costs, and whether these
policies are consistent with OMB guidance.
The NSF IG questions the use of contingency and the way the cost
estimate on NEON--and every other major equipment project at NSF--was
done. NSF disagrees. As Dr. Buckius will testify, they have gone
through the extensive audit disposition and appeal process as laid out
at NSF. Having adopted reforms, they feel they are fully consistent
with OMB's expectations for how to manage risk and estimate costs. A
plain reading of OMB's updated regulations unambiguously supports NSF's
position. Yet the IG continues to make every effort to have her views
adopted.
To put it mildly, this situation is unfortunate, and it is
demoralizing to the Agency's hard-working staff. But this Committee is
not equipped to solve any of this today. The National Science Board,
the Foundation's oversight board, is aware of these issues and has a
good understanding of them. I hope that the Board will consider a
careful review of NSF's practices and policies with respect to large
facilities. If the Board identifies legitimate facilities management
and oversight concerns, I would be happy to join my colleagues in
appropriately addressing those concerns.
In the meantime, I intend to send a letter to GAO asking for a
review of how agencies estimate costs for major R&D construction
projects and how they set and manage contingency. GAO should look first
at how NSF does it, and then provide some comparison to how other
agencies do the same things. Perhaps GAO can help settle this impasse
at NSF.
In closing, I hope we can keep our rhetoric and actions today
measured and based on fact, and be clear that the issues to be
considered, if we are serious, go far beyond one small environmental
non-profit's use of its fee.
With that I yield back.
Chairman Loudermilk. So we are honored to have the presence
of the Chairman of the full Committee with us here today, and
so I now recognize the Chairman of the Science, Space, and
Technology Committee, the gentleman from Texas, Mr. Smith, for
an opening statement.
Chairman Smith. Thank you, Mr. Chairman, and Mr. Chairman,
also, congratulations on having the first hearing of the
Oversight Subcommittee of the year, and I appreciate your
leadership of the Subcommittee.
I also want to say to the Ranking Member, I will be happy
to join her in the letter that she referred to a couple of
minutes ago.
Mr. Chairman, this morning's hearing will focus on one of
the National Science Foundation's largest major research
facility projects, the National Ecological Observatory Network,
or NEON Project. We are fortunate to have with us the Chief
Operating Officer of the NSF, the Chief Executive Officer of
NEON Incorporated, the nonprofit that manages the NEON Project,
and a representative from the Congressional Research Service.
Our witnesses will discuss the process for awarding, managing
and overseeing this $433 million cooperative agreement between
the NSF and NEON. Under this cooperative agreement, NSF has
committed to pay up to $433 million to NEON for design,
construction and initial operation of a national network of
ecological sensors. The NEON project is the first of its kind,
and it is also a huge public investment.
To assure taxpayer money is spent appropriately and as
efficiently as possible, NSF and NEON needed to work together
closely. As we heard at the first NEON hearing, the Inspector
General's independent audit of NEON's cost proposal identified
more than $150 million in unsupported or questionable costs.
Most or substantially all of these costs might have been
resolved by NSF and NEON, but NSF simply went ahead and made
the NEON award. A subsequent audit of NEON's accounting system
revealed a number of inappropriate NEON expenditures, including
lobbying, parties, and travel, all financed by the management
fee NSF agreed to pay NEON for ordinary and essential business
expenses. These expenditures were brought to our Committee's
attention and to public attention by a whistleblowing auditor
at the Defense Contract Audit Agency, which did both audits for
the NSF IG.
The results of the two independent audits and other
information show there have been significant lapses in
communications and financial controls for the NEON project. In
the testimony we will hear today, NEON acknowledges that it has
made some serious mistakes. For its part, NSF has already made
some internal changes and has issued draft regulations to
prevent expenditure of federal funds on expensive parties and
other inappropriate activities.
The basic responsibility of any government agency is to act
in the national interest. I hope we can develop a solution,
including the possibility of legislative action, so that this
misuse of funds does not happen again. We must remember it is
the people's money, not the government's money.
This unfortunate situation illustrates the importance of
adequate Congressional oversight of federal agencies. The NEON
project's problems may have never been brought to light except
for the interest and actions our Committee has taken.
Thank you, Mr. Chairman, and yield back.
[The prepared statement of Mr. Smith follows:]
Prepared Statement of Committee on Science, Space, and Technology
Chairman Lamar Smith
This morning's hearing will focus on one of the National Science
Foundation's (NSF's) largest major research facility projects, the
National Ecological Observatory Network, or NEON.
We're fortunate to have with us the Chief Operating Officer of the
NSF, the Chief Executive Officer of NEON Incorporated, the non-profit
that manages the NEON Project, and a representative from the
Congressional Research Service.
Our witnesses will discuss the process for awarding, managing and
overseeing this $433 million cooperative agreement between the NSF and
NEON.
To be clear, this is a cooperative agreement, not a grant, so the
NSF and NEON should have worked closely together throughout the
agreement to prevent what has occurred here.
The NSF entered into an agreement with NEON to develop, construct
and operate the project's network of sensors. This agreement was valued
at over $400 million.
An audit of NEON's cost proposal identified more than $150 million
in unsupported or questionable costs. It also indicated that a ``fair
and reasonable basis'' did not exist for NSF to enter into the
cooperative agreement with NEON.
But NSF did not wait for the audit results and went ahead and
awarded the $400 million agreement to NEON.
During a second audit of NEON's management, several highly
questionable expenditures of taxpayer funds were discovered. This
includes hundreds of thousands of dollars spent on lobbying, lavish
parties, and liquor for office happy hours.
Thankfully, Congress and the public were made aware of these
questionable expenditures when a whistleblower came forward.
This morning, I hope to hear why NEON concluded, for example, that
spending $25,000 for a holiday party was an appropriate use of federal
funds? And why did the National Science Foundation allow this to
happen?
The NSF must be held accountable for how they spend millions of
taxpayers' dollars. Unfortunately, this appears to be another example
of waste and misuse of taxpayer funds we've seen too often at the NSF.
The basic responsibility of any government agency is to act in the
taxpayers' interest. I hope we can develop a solution so that this
misuse of funds does not happen again. We must remember that it is the
people's money, not the government's money.
Chairman Loudermilk. Thank you, Mr. Chairman.
If there are Members who wish to submit additional opening
statements, their statements will be added to the record at
this point.
At this point I ask unanimous consent that the following
documents be entered into the record. We have an email, the
letter to Senators Grassley and Paul as well as the National
Science Foundation Business Systems Review. Without objection,
we will have these entered into the record.
[The information appears in Appendix II]
Chairman Loudermilk. At this time I would like to introduce
our witnesses today, and thank you for being here. We
appreciate your attendance.
Our first witness is Dr. Richard Buckius. Did I pronounce
that correctly?
Dr. Buckius. Perfect.
Chairman Loudermilk. All right. Thank you. Dr. Richard
Buckius, who is the Chief Operations Officer for the National
Science Foundation. Thank you for being here.
Our second witness is Dr. James Collins, who is the
Chairman of the National Ecological Observatory Network
Incorporated. As well, thank you for being here.
And finally, our final witness is Ms. Kate Manuel. Is that
right? All right. Who is a Legislative Attorney with the
Congressional Research Service. Again, thank you for being
here.
Pursuant to Committee rules, all witnesses will be sworn in
before they testify, and I understand that Ms. Martha
Rubenstein--is that correct--Chief Financial Officer for the
NSF, will be advising Dr. Buckius in answering questions on the
record. Ms. Rubenstein, please also stand to be sworn in. So if
I could have all the witnesses please stand and raise your
right hand? Do you solemnly swear or affirm that the testimony
that you are about to give will be the truth, the whole truth
and nothing but the truth, so help you God? Let the record
reflect that the witnesses answered in the affirmative. Thank
you, and please be seated.
In order to allow for discussion, please limit your
testimony to five minutes. Your entire written statement will
be made part of the official record.
I now recognize Dr. Buckius for five minutes to present his
testimony.
TESTIMONY OF DR. RICHARD BUCKIUS,
CHIEF OPERATING OFFICER,
NATIONAL SCIENCE FOUNDATION
Dr. Buckius. Mr. Chair, Ranking Member and Members of the
Subcommittee, thank you for the opportunity to testify today.
My name is Richard Buckius. I am the National Science
Foundation's Chief Operating Officer, a position I assumed just
in the fall of 2014.
As you have just been told, Marty Rubenstein, a colleague,
is the Chief Financial Officer at NSF, and she will be joining
me later to answer the questions and answers.
The objective of my oral comments are to address your
specific questions and to focus on moving forward to improve
NSF's processes related to our major research facilities.
To make two important context points before I answer the
questions you have raised, the National Science Foundation
supports fundamental research in the frontiers of knowledge
across all fields of science and engineering primarily through
financial assistance awards. That is, our grants and
cooperative agreements. The NSF Act of 1950 expressly focuses
NSF investments on extramural research, prohibiting direct
operations of laboratories. It makes us different than some of
our sister agencies.
The Federal Grant and Cooperative Agreement Act helps
determine the mechanisms that NSF uses for its awards. The
cooperative agreements are used if substantial involvement is
expected by the awarding agency beyond that of routine
monitoring and technical assistance. We use this mechanism to
allow the scientific justifications, designs and specifications
to be prepared by the science and engineering community to
permit NSF's involvement in overseeing the scientific progress
and investments, and to provide NSF the flexibility to address
emerging needs of science and engineering communities.
Second, the management of major research facilities such as
NEON is of critical importance to the Foundation. As you will
hear from Dr. Collins, this is a one-of-a-kind continental-
scale research instrument consistent of geographically
distributed cyber-enabled networks of sensors and biological
instruments. NSF relies on outside groups such as NEON
Incorporated to build, manage and operate these unique
scientific facilities. Management fees allow these groups to be
viable and are an important tool for the stewardship of
taxpayers' dollars. Taxpayers, NSF, the scientific community
and the Nation would be ill served if these groups struggle
financially or if they fail.
NSF acknowledges that some of the activities that NEON
Incorporated engaged in using the management fees showed poor
judgment even if they are not in violation of any law or
regulation governing the use of these funds. The Foundation has
learned a number of lessons about the governance of large
facilities' management fees due to this event and has put in
place significantly tighter oversight.
Now to your questions. First, like all federal agencies,
NSF embraces organizations only for--excuse me--reimburses
organizations only for costs incurred under federal awards that
are determined to be allowable, allocable and reasonable under
federal cost principles. NSF has controls in place to prevent
the reimbursement of costs that are unallowable under federal
cost principles. NSF has strengthened requirements set forth by
the agency's large facilities manual for prospective large
facility awardees to provide adequate documentation for cost
estimates and through gateway reviews of these projects.
Second, regarding use of management fees, as you have
heard, GAO has concluded that the use of management fees for at
least some non-reimbursable expenses incurred by nonprofit
organizations represent legitimate needs of the organization
and they benefit the U.S. government. Although the payment of
management fees has been a longstanding, legally permissible
practice at NSF and other agencies, guidance on those fees,
either government wide or at NSF, has not been as clear as we
need, and enhanced procedures to monitor its use need to be put
in place. To this end, I have asked our Chief Financial Officer
to work aggressively to complete new policy implementations
that will provide specific guidelines on the use of management
fees and implement controls to monitor the actual management
fee used by awardees to ensure that it is consistent with the
intended purposes.
These proposed new policies have recently been published in
the Federal Register, and NSF is moving forward with
implementing their use and evaluating these fee requests.
And finally, the contingency cost estimates. NSF is fully
compliant with the Office of Management and Budget guidance on
the use of contingency fees estimates including when such
estimates may be included in financial assistance awards. This
guidance has recently been clarified by OMB and follows
industry and government best practices on the construction of
large facilities. NSF's strengthened requirements for cost
estimates at gateway reviews incorporate these best practices.
Mr. Chair, although NEON Incorporated used the management
fees in technically permissible under NSF's awards, NSF shares
the Committee's concerns on the use of management fees. We have
used the situation to clarify our policies and procedures in
awarding the oversight of such fees. It is only through the
strong support of the IG, our Inspector General, and the
Congress that complete oversight of taxpayer resources can
ultimately be achieved, and we appreciate the support.
Again, thank you for the opportunity to testify. The NSF
CFO and I look forward to your questions.
[The prepared statement of Dr. Buckius follows:]
[GRAPHIC] [TIFF OMITTED]
Chairman Loudermilk. Thank you, Dr. Buckius.
I now recognize Dr. Collins for five minutes to present his
testimony.
TESTIMONY OF DR. JAMES P. COLLINS,
CHAIRMAN,
NATIONAL ECOLOGICAL OBSERVATORY NETWORK
Dr. Collins. Distinguished Chairwoman Comstock and Chairman
Loudermilk, Ranking Member Johnson and Members of the Committee
on Science, Space, and Technology, my name is Dr. James
Collins. I serve as Chairman of the Board of Directors of NEON
Inc., a 501(c)(3) corporation established to implement NEON, or
the National Ecological Observatory Network Project. The
project is supported by the NSF. From 2005 to 2009, I served as
Assistant Director for Biological Sciences at the National
Science Foundation. Since 2010, I have had no formal
affiliation with the agency.
I appreciate the opportunity to come before this Committee,
which has taken the lead in Congress in ensuring that the
United States remains the standard-bearer in cutting-edge
scientific research. We appreciate very much that this
Committee has been a strong supporter of NEON from its
inception.
As many of you know, NEON is an advanced research
infrastructure for the study and analysis of the biosphere on a
regional to continental scale. Living systems are experiencing
some of the greatest rates of alteration caused by multiple
changes in the environment. These changes affect biodiversity,
air quality, water resources, agriculture, and other goods and
services that healthy ecosystems deliver to humans.
Understanding how these changes impact our natural resources
requires a fully integrated, multi-scale research
infrastructure to detect, understand, and forecast changes. The
data sets collected by NEON will allow us to understand, at an
unprecedented level of detail, the impacts of large-scale
environmental changes on our ability to sustainably meet
society's food, fiber, energy, and water needs.
Moreover, NEON is not only an essential investment for
continued U.S. scientific leadership, but it also helps fuel
our Nation's long-term competitiveness and innovation by
advancing basic and applied ecological research.
You have asked that I address three specific topics in my
testimony. The first two are ``reimbursement for unallowable
costs'' and ``terms, conditions, and use of management fees.''
Because I am not a lawyer, I will not attempt to delve deeply
into the legal issues relating to unallowable costs and
management fees, which are better addressed by the NSF in any
event. But let me offer the following.
My understanding is that, under OMB regulations,
unallowable costs are those costs of a business that are not
allowed to be charged either as a direct cost or an indirect
cost to a federally funded project. These costs generally
include normal business costs such as fees for termination of
contracts, late fees, and general advertising costs. Costs
associated with government outreach, alcohol, and social events
are also deemed ``unallowable.'' Unallowable costs cannot be
paid with appropriated funds and must be paid by other funds of
the organization.
NEON has received a management fee from the NSF for the
management of the NEON project since 2009. It is our
understanding that OMB has long held that fees in the case of a
nonprofit like NEON or profit in the case of a private business
are not considered appropriated funds and are outside the scope
of OMB Circular A-122 and the Byrd Anti-Lobbying Amendment.
NEON has used management fees to cover a variety of costs
including those associated with contract termination, late fees
and other normal business expenses. NEON has also used
management fees to cover costs associated with government
outreach, providing amenities including coffee for its
employees, and meals and social functions that included the
purchase of alcohol. We are aware that NSF is proposing to
establish a new policy that would prohibit the use of
management fees for these aforementioned categories. Let me say
that we understand the NSF's desire to change its policy
relative to management fees and we appreciate the Committee's
concerns with these types of expenditures.
In retrospect, we could have done better when it came to
determining how to spend management fees. Moving forward,
regardless of what the law allows, NEON will not seek
management fees for the expenses that NSF proposes to prohibit,
including expenditures for alcoholic beverages and government
outreach. Indeed, NEON has already implemented the restrictions
that the NSF has proposed.
The third issue you asked us to address is ``calculation
and use of contingency cost allowances.'' NEON is supported via
a cost-reimbursable assistance award between the NSF and NEON
Inc., which means that NEON maintains a contingency pool fund.
NEON developed a contingency cost proposal consistent with the
NSF's Large Facilities Manual. NSF's guidelines include levels
of reporting, approval, and review. NSF awarded NEON
contingency funds consistent with its proposal.
Let me conclude by pledging going forward to redouble our
efforts to be good stewards of the taxpayers' funds we receive.
We owe as much to the American people and will do what it takes
to retain their trust, and yours.
Thank you, and I welcome your questions.
[The prepared statement of Dr. Collins follows:]
[GRAPHIC] [TIFF OMITTED]
Chairman Loudermilk. Thank you, Dr. Collins.
I now recognize Ms. Manuel for five minutes.
TESTIMONY OF MS. KATE MANUEL,
LEGISLATIVE ATTORNEY,
CONGRESSIONAL RESEARCH SERVICE
Ms. Manuel. Thank you. Chairmen, Ranking Members and
Members of the Subcommittees, I am Kate Manuel and I am a
Legislative Attorney with the Congressional Research Service. I
am honored to be testifying before you today on CRS's behalf
about certain issues pertaining to the National Science
Foundation's use of cooperative agreements.
As requested, my testimony provides background information
on three topics: when agencies may use cooperative agreements
and other types of contractual agreement instruments, the
allowability of costs under government contracts, and the
traditional distinction between fees and costs.
First, as to the use of cooperative agreements and other
types of instruments, under federal law, executive agencies
generally must use cooperative agreements when their principal
purpose is to transfer something of value to a non-federal
entity to carry out a public purpose of support or stimulation
authorized by federal law, and the agency expects to have
substantial involvement with the non-federal entity in carrying
out this activity. Grant agreements have the same principal
purpose but must generally be used when the agency doesn't
expect to have substantial involvement with the non-federal
entity.
Procurement contracts, in contrast, generally do not have
the principal purpose of transferring something of value but
instead are typically used to acquire property or services for
the direct benefit or use of the federal government. All three
types of instruments could potentially constitute contracts as
that term is generally understood. The relevant agreement
between NSF and NEON appears to have been denominated a
cooperative agreement.
Second, as to allowability, allowability is a core concept
in compensating the government's partners under legal
instruments that do not involve the payment of solely fixed
prices or amounts. For a cost to be allowable, it must, among
other things, be reasonable or not exceed in its nature or
amount that which a reasonably prudent person would incur under
the circumstances. It must also be allocable or involve
supplies or services that are chargeable or assignable to the
federal award or cost objective in accordance with the relative
benefits received. In addition, the costs must generally
conform to certain limitation or exclusions set forth in the
applicable guidelines or regulations or in the agreement
itself.
As to the three main types of cost discussed in relation to
the NSF Neon agreement, the relevant guidelines and regulations
provide that the cost of alcoholic beverages are unallowable.
The cost of entertainment has historically been unallowable but
now may be allowable in certain narrow circumstances, and the
cost of specified lobbying activities are unallowable while
other activities are permitted. However, certain provisions of
law or policy guidance could be construed to mean that agencies
may allow particular costs in individual agreements that would
not necessarily be allowable under the standard guidelines or
regulations.
Third, and finally, as to fees, fees are potentially
distinguishable from costs. Fees are arguably best known in the
context of federal procurement contracts since the Federal
Acquisition Regulation, or FAR, expressly authorizes the
payment of fees as an allowance for profit to contractors
working under certain types of contracts. The FAR does not
specifically address the management fees reportedly provided
for in the NSF NEON agreement. Similarly, there are no
provisions in the relevant OMB circular or regulations or in
the NSF's proposal and award policies and procedures guide that
appear to address management fees in those terms. However, the
NSF guide does provide the payment of fees or profit generally
is permissible if expressly authorized by the terms and
conditions of the award and neither it nor the relevant OMB
circular or regulations would appear to expressly bar the
payment of management fees under cooperative agreements.
As a matter of historical practice, some agencies have paid
management fees as distinct from costs in the past. However,
other agencies have expressly indicated they wouldn't provide
management fees at least to for-profit entities. It should also
be noted that the characterization of something as fees or
costs in a contract by the parties would not necessarily be
dispositive if the overall agreement evidenced a contrary
intent.
This concludes my oral statement for today. I appreciate
the opportunity to appear before you and look forward to
answering any questions you may have. Thank you.
[The prepared statement of Ms. Manuel follows:]
[GRAPHIC] [TIFF OMITTED]
Chairman Loudermilk. Again, I thank the witnesses for their
testimony, and members are reminded that the Committee rules
limit questioning to five minutes. With that, the Chair
recognizes myself for five minutes for questions.
Dr. Buckius, as I mentioned in my opening statement, the
NSF's letter to Senators Grassley and Paul indicates that 15 of
your active awards use management fees. The NSF also notes in
that letter that six of those awardees excluding NEON have
received almost $5 million in fees.
I appreciate that you acknowledge that there may have been
poor judgment used in those fees and that some controls are
being put into place, but I am wondering how much of that $5
million for management fees was spent on liquor, lobbying and
parties and other typically unallowable items.
Dr. Buckius. So we have written to all of the six that you
have referred to and asked them to report back to us on their
use of their management fees, so it is not going to be possible
for me to answer that question specifically at this particular
time, although we are going to monitor that.
Chairman Loudermilk. If NEON has been spending taxpayer
money under management fees for these type of expenditures--
liquor, lobbying--without any apparent knowledge or oversight
from NSF, how are we to know that other awardees are not doing
the same thing with those? Is that what your report that you
are looking to find out with the inquiry that you have done to
these other awardees?
Dr. Buckius. So as you have just heard from Ms. Manuel,
these are perfectly legitimate, I would argue poor judgment,
purchases. We are now writing to them all to figure out exactly
how they have used it. We just don't have that answer at this
point in time.
Chairman Loudermilk. And I appreciate your forthrightness
there, and as you said, there is a lot of times a difference
between what is technically legal and what is acceptable or
right to do.
Do you anticipate, are there going to be consequences or
have there been any consequences for those that you are aware
of?
Dr. Buckius. Well, because of what you have just been told
by Ms. Manuel, since they are legal, the only thing we can do
is not provide the next management fee, which is what we did in
the case of NEON. Once we found this out, we no longer approved
their next request, so that is our technique in order to be
able to manage this.
Chairman Loudermilk. Further, if the NSF's proposed rule,
it indicates that NSF is strengthening the controls, as you
have mentioned that you are doing, it may be necessary to
ensure that the user fees are consistent with those established
criteria. The statement presupposes that there were already
controls in fact in this letter to Senators Grassley and Paul
when discussing management fees. NSF states, given that the
fees awarded are discretionary funds, NSF does not require that
its awardees report how these monies are expended. Thus, we do
not require that the awardees submit an accounting of how they
may cover otherwise unallowable costs with the management fee.
Since we are talking about taxpayer money that the NSF has
awarded, why in the world would you not require awardees to
submit an accounting of how they are spending that money?
Dr. Buckius. So your first statement is exactly correct as
we wrote to the Senators. We did not ask them to account for
that for all the reasons that we have just discussed, as Ms.
Manuel has indicated in the case of such fees. What we do is,
we ask them at the origination to give us their intent, okay.
In the case of the NEON project, the intent was very explicit.
It said meals, it said government outreach, all of which would
benefit them in their endeavor. So my point is, is that we did
everything that we could within the restrictions that we had.
Chairman Loudermilk. With that, and as we have addressed
already that there may have been some poor judgment used,
should we be surprised since they did not have to account to
you for the monies that were expended, are we to be surprised
that they were used in poor judgment for things such as holiday
parties?
Dr. Buckius. So specifically, so let's take the government
outreach one. In the case of the 2008 management fee
description, here is what they said. NEON anticipates the need
to provide education to various government organizations as to
NEON's mission, strategy and requirements. That is a perfectly
viable thing to use a management fee for, something that we
would want them to do. Now, what they did, we thought was in
very poor judgment, okay? It wasn't consistent with what I
would have thought that they would have done, but when we gave
them the management fee, they gave us an indication of what
they were going to do with it, and we assumed that they would.
Chairman Loudermilk. Well, to follow up on that, so $25,000
on a Christmas party was outside of what the NSF would have
expected NEON to use the money for. Is that what you are
saying?
Dr. Buckius. Again, I would say that is poor judgment, and
to reiterate what I did say, we have posted in the Federal
Register for comment various items that we think should not be
included in any future management fees, and we are open to
listening to folks to provide us this kind of information so
that we are spending the taxpayers' money in the way that we
want.
Chairman Loudermilk. Thank you. The Chair now recognizes
the gentlelady from Texas, Ms. Johnson.
Ms. Johnson of Texas. Thank you very much.
Dr. Buckius, I have listened to your testimony, and I think
you have answered most of the questions. I am going to ask the
question for reiteration.
The IG's recommended methods would also be an acceptance
within the guidance, I suppose, and so it would seem to me that
even though this could be labeled poor judgment, there is
nothing about it that has been illegal.
Dr. Buckius. That is a true statement.
Ms. Johnson of Texas. And this appears to be a common
practice across the government.
Dr. Buckius. I can't comment on that. I hope not.
Ms. Johnson of Texas. But--and I know that the IG's
recommendations or methods, would also be in compliance with
what you are dealing with now. The IG's seem to differ some,
but at the end of the day, who sets the policy at NSF? Is it a
director and the board or is it the Inspector General?
Dr. Buckius. So I guess officially it would be the
director. Obviously the way NSF functions, we work very closely
with the National Science Board, so I would assume that there
is going to be a give and take to ensure that, but it is the
agency that sets down these policies. The IG, as we all know,
ensures and checks to ensure that we are all spending taxpayer
money the way it should be spent.
Ms. Johnson of Texas. Can you briefly describe the efforts
at NSF to accommodate the IG's concerns about the risk in cost
estimating and contingency?
Dr. Buckius. Okay. So contingencies can be estimated in a
number of different ways. The way we chose to do it is based
upon a broadly accepted cost-estimating methodology. So this is
not money that can be spent any way that they choose. There is
a very specific layout of items that can be considered that you
can't necessarily predict exactly how it is going to come out.
That the principles that we use.
The IG would prefer that we use audits, and the audit that
was referred to earlier was done and we received the
information after we had made the award. That is a very
important piece of information. So we made the award, and then
the audit tells us that we should have done some reviews
otherwise. Our estimating procedures are just different. I
would argue as good as but different.
Ms. Johnson of Texas. Thank you. Now, our research found
that the federal government that--the practice in federal
government goes back to the Bell Report in 1962, and to the
degree that OMB even addresses fees or profit, it appears that
OMB treats that money as the recipient's funds and not
government money.
Dr. Buckius. Correct.
Ms. Johnson of Texas. My time is limited, but I would like
you, Dr. Buckius, and Dr. Collins, if you would comment on, are
you confident that the way the fees were spent by NEON does not
represent a violation of law?
Dr. Buckius. Specifically, it does--it is not a violation,
okay? Again, I would use the words ``poor judgment,'' okay, but
not a violation.
Ms. Johnson of Texas. Thank you. Dr. Collins?
Dr. Collins. That is correct. It is not a violation of the
OMB circular and guidance that NEON received.
Ms. Johnson of Texas. Thank you very much.
Thank you, Mr. Chairman. I yield back.
Chairman Loudermilk. The Chair recognizes the Chairwoman
from Virginia, Mrs. Comstock.
Mrs. Comstock. Good morning. Thank you, Mr. Chairman.
Certainly, we all want to be and are strong advocates for
science and scientific research, so the situation today and
what we are discussing is really our concern about, you know,
not having problems like this, you know, that are public and
the taxpayers see how their money is spent and then having that
concern that it is not going to the very basic research and the
things that we want it to, so I think--I certainly think my
colleagues here, we want to have this discussion so that, you
know, every dollar we are putting towards this important effort
is going to the vital research that we need, so I appreciate
while there may not be legal problems, as you all have
indicated, it is poor judgment, and I appreciate that that has
been recognized.
And so I did want to--I had some questions here that we
wanted to establish for the record that the independent Open
Secrets website, it said NEON had paid at least $375,000 to
registered lobbyists between 2010 and 2014. Would you be able
to confirm that?
Dr. Buckius. I can't confirm that, but again, for the
reasons we said, since it is a management fee, it is
permissible.
Mrs. Comstock. Okay, you know, and I understand----
Dr. Buckius. I absolutely agree with everything you just
said, okay. We need to spend taxpayer dollars on science and
engineering. That is the goal of the Foundation, and so I
completely support all of your comments.
Mrs. Comstock. Okay, and Dr. Collins.
Dr. Collins. I would have to check for the specific number
with our financial people but I know that it is in that area.
Mrs. Comstock. Okay, and we can submit for the record, Mr.
Chairman, some records from the OpenSecrets.org, which do
indicate $375,000, but if there is a correction that any of the
witnesses would like to make, we could also include that in the
record.
Could you explain the process in terms of hiring the
lobbyists and what they were engaged to do?
Dr. Collins. Well, I was not involved in the hiring of the
lobbyists as chairman of the board now, was not chairman at
that particular time, but the engagement had to do, as had been
described earlier, with retaining a group of individuals who
could work as far as NEON is concerned to especially help
educate Congress as far as what the NEON Project was about so
that you would have the very best information in terms of
making decisions that you needed to make.
Mrs. Comstock. I know, and I think that is the concern we
have because I know in instances when I was in the state
legislature, we would give money to one body, then they would
want to spend money on lobbyists to come back and lobby us for
more money, and so spending taxpayer money to ask us for more
taxpayer money I think is a frustration here that we have
instead of having it go to the research because as we are
evaluating this and giving the money to NSF, it is because we
do value that research so you can--you know, you can come as an
entity, others can come, citizens can come inform us of this,
and that is our responsibility to understand that important
thing rather than have outside lobbyists come and tell us what
we are already tasked to do for the taxpayers.
So I am glad that that policy will be changed and you
understand that the poor judgment of that, and I do think that
unfortunately this happens across the government in a lot of
ways, and I know in the case when we were in the state
legislature when that came to us, we stopped that and we said,
please, just come to us, talk to us about this directly, you
know, we are already your advocates, and we want to be your
advocates to have more basic research money but you make our
job more difficult when these kind of things happen and then
taxpayers look and say well, gee, you took our money but it is
now going not to that basic research but to the lobbyists.
So I would appreciate if we could, you know, maybe have any
of the letters of engagement or information that you could
provide for what they were tasked with and just sort of what
the thinking is there so that maybe we can look at other areas
of research where that kind of thing is going on where we maybe
want to do what you all are doing now, which is putting a stop
to that, recognizing that that makes our jobs as advocates more
difficult.
So I believe I am running out of time here, Mr. Chairwoman,
so I will yield back my few seconds here.
Chairman Loudermilk. The gentlelady has yielded back.
Chairman Comstock also asked that certain records she
referenced be added to the official record, and without
objection, I ask unanimous consent that the documents be added
to the official record.
[The information appears in Appendix II]
Chairman Loudermilk. At this time I recognize the gentleman
from Florida, Mr. Grayson.
Mr. Grayson. Thank you, Mr. Chairman.
Ms. Manuel, stop me if I am wrong, all right? Among
government contracts, arrangements like this in general, there
are firm, fixed-price contracts and there are cost-
reimbursement contracts, correct?
Ms. Manuel. That is one of the ways, the taxonomies in
which people talk about contracts, yes.
Mr. Grayson. All right. And among the types of cost-
reimbursement contracts, there are cost-plus fixed fee
contracts and cost-plus other kinds of fee contracts. Is that
correct?
Ms. Manuel. As to procurement contracts, yes.
Mr. Grayson. All right. And the general breakdown, the
distinction that is made in that case is between costs and fees
of various types. Is that correct?
Ms. Manuel. That is correct.
Mr. Grayson. All right. Now, costs have to be allowable,
allocable and reasonable, correct?
Ms. Manuel. That is correct.
Mr. Grayson. But not fees, right?
Ms. Manuel. No. If you are talking about the procurement
contracts, you know, there, specifically, the fees have to be
earned pursuant to the terms that are set forth in the
contract.
Mr. Grayson. All right. So when we talk about--when we are
talking about the allowability of costs, we are talking about
the allowability of costs, right, not the allowability of fees?
That is a meaningless term, correct?
Ms. Manuel. As a general matter, that would be true. I
mean, I can't say that there could never be a contract that
purported to blur the two, but in general, that would be the
distinction.
Mr. Grayson. All right. But this wasn't one of those blurry
contracts, right? This contract provided for costs and for a
fee, right?
Ms. Manuel. That is my understanding, yes.
Mr. Grayson. Okay. So we are talking about at this point
whether $25,000 for a Christmas party, $11,000 for coffee
services, $3,000 for dinners, $3,000 for tee shirts and other
apparel, and $112,000 for lobbying contracts could be spent as
a fee, as part of a fee that the company received, not as part
of its allowable costs, correct?
Ms. Manuel. That would appear to be the distinction that
was made between there were--there were the things that were
cost and were judged in terms of their allowability and then
there was a separate management fee, and insofar as that is a
true fee, that would not be subject to the rules regarding the
allowability of cost.
Mr. Grayson. All right. So in essence, there are few, if
any, restrictions under existing law for what you do with you
fee. It is money in your pocket, right?
Ms. Manuel. That would generally be correct, yes.
Mr. Grayson. Okay, and we don't generally dictate to people
how they spend their own money, right? It is not a trick
question. It is pretty basic.
Ms. Manuel. Well, we are CRS. I am trying to think neutral
and unbiased. I think that would generally be the case, yes.
Mr. Grayson. Okay. So are not going to normally engage in a
war on Christmas here and tell people they can't spend their
own money on Christmas parties, right?
Ms. Manuel. Insofar as nothing in the contract, you know--
it is denominated a fee and nothing in the contract purports to
restrict or what other law purports to restrict how they use
their fee.
Mr. Grayson. Okay. By the say, I am sending this clip to
Bill O'Reilly, just so everybody is aware.
Listen, when Boeing gets a fee, Boeing gets a fee under
many different government contracts, and in fact, earns profits
under non-government contracts. Is that correct?
Ms. Manuel. That is correct.
Mr. Grayson. And have you heard the phrase ``money is
fungible''? Is that a phrase you have heard before?
Ms. Manuel. Yes.
Mr. Grayson. Okay. So what does that mean exactly, money is
fungible?
Ms. Manuel. It is going to mean there that once Boeing has
earned its fee, it doesn't matter whether it was, you know,
when Boeing is spending it that it was money that it got from
the government or from some other source.
Mr. Grayson. All right. So what that means in essence is
that since money is fungible, when a company, a human being,
any entity receives cash and it is mixed in with other cash, it
becomes basically untraceable at that point. Money is money. It
is all green, correct?
Ms. Manuel. That is correct.
Mr. Grayson. All right. So when we try to actually trace
what happens to fees, we are doing something that is basically
difficult, if not impossible, because money is fungible, right?
Ms. Manuel. Insofar as you were talking about a true fee
and something like the fees under the procurement contracts,
then yes.
Mr. Grayson. All right. The reason why I am asking these
questions and the reason why I am asking this way is because I
don't want this Committee to become a scold. I don't want us to
be taking it upon ourselves to investigate whether people drank
alcohol at specific meals or whether they had a Christmas
party.
I have a larger, bigger view of science and technology than
that. I think of the sky and the stars, and I think of fusion
power, and I think of all of the magnificent accomplishments
that science has brought to us as a species, as human beings,
and I don't want to be dragged down into the point where I am
looking around and saying I am shocked, shocked that gambling
is taking place in this establishment like in the movie
Casablanca. I think we should aim higher than that. Thank you.
Chairman Loudermilk. The Chair now recognizes the gentleman
from Ohio, Mr. Johnson.
Mr. Johnson of Ohio. I thank you, Mr. Chairman, and I thank
the panel for being with us today.
What we are talking about today is the responsible use of
taxpayer dollars. I appreciated my colleague, Mr. Grayson's
line of questioning. He said--if I am correct, he said we can't
tell people what to do with their own money. Well, this is not
their own money. This is the hard-earned tax dollars of
millions of American people that are filling the coffer and we
are talking about accountability on the use of that money and
we are talking about transparency so the American people can
see how that money is being used.
Dr. Buckius, in the NSF's proposed rule, it specifically
lists a number of items including alcohol and non-business
travel, non-business meals, luxury or personal items, and
lobbying as examples of expenses that do not benefit NSF.
Surprisingly, especially given the abuses by NEON, the NSF does
not prohibit the use of management fees for these federally
unallowable expenses. In your written statement, you indicate
that management fees are not to be used for such purposes but
the NSF proposed rule doesn't explicitly prohibit. Why are
these expenditures not explicitly prohibited in NSF's proposed
rule?
Dr. Buckius. So are you referring to the past or future? So
you have just been told that it is perfectly legitimate to----
Mr. Johnson of Ohio. I am not talking about what is legal.
I am talking about your proposed rule.
Dr. Buckius. Okay. So what we are going forward with is a
policy that will ensure that these things----
Mr. Johnson of Ohio. Does the proposed rule explicitly
prohibit the use of those things that you have indicated that
are not appropriate?
Dr. Buckius. It is proposed, remember. We are still taking
comment on it.
Mr. Johnson of Ohio. Does it explicitly prohibit and do you
think it should?
Dr. Buckius. Two different questions. I do----
Mr. Johnson of Ohio. Well, let us answer the second one
first because that is the easy one.
Dr. Buckius. I think----
Mr. Johnson of Ohio. Do you think it should?
Dr. Buckius. I think it should.
Mr. Johnson of Ohio. Okay. Well, great. Well, then let's
discuss accountability for the use of management fees.
I have here an email from Timothy P. Kashmer of NSF to Tom
Sheldon at NEON on January 8, 2009, and Mr. Chairman, I would
ask that that be entered into the record. And Mr. Kashmer says,
``There is no rule or requirements for drawing down management
fees for assistance awards. These are unauditable fees.''
So do you agree that no one should be surprised that NEON
used management fees as it did? By deeming the fees unauditable
and informing NEON that there are no rules for their use, did
NSF essentially signal NEON that it had carte blanche to use
the fees in any way that they desired?
Dr. Buckius. No, that is not true. So they proposed uses
for the management fees that did not include the things that
you just referred to, and we provided them management fees to
do that. They went ahead and used it for things that were not
in the list.
Mr. Johnson of Ohio. On what basis do you think then it
would be appropriate to conclude that the management fee is
unauditable? I mean, is all NSF funding appropriated by
Congress?
Dr. Buckius. I am not a lawyer. I can't answer that one.
Maybe--I guess the answer is yes.
Mr. Johnson of Ohio. And is any of the money that is
appropriated or that Congress gives to NSF, is any of it not
appropriated?
Dr. Buckius. I am sorry.
Mr. Johnson of Ohio. My question is, how then, if this is
appropriated money, how does it magically turn into non-
appropriated money that is not subject to be audited?
Dr. Buckius. Okay, Marty, you're going to have to answer
this one.
Mr. Johnson of Ohio. You can't do that by policy, I don't
think.
Dr. Buckius. But this is a fee. This is a management fee,
and it has all of the----
Mr. Johnson of Ohio. But it is appropriated money, correct?
Dr. Buckius. Yes.
Mr. Johnson of Ohio. Okay, and it is my understanding, Ms.
Manuel, isn't all appropriated money from Congress subject to
being audited?
Ms. Manuel. I don't know about auditing per se but I do
know with federal procurement contracts that contract--it is
appropriated money that goes out the door in fees, and the
general rule there has been that it is the contractor's money
once they have earned the fee.
Mr. Johnson of Ohio. Okay. All right.
Dr. Buckius, do you agree that regardless of a loophole in
the law, that the use of taxpayer money on alcohol--and I think
you have already said this--entertainment, lobbying is an
unreasonable and inappropriate waste of taxpayer funds?
Dr. Buckius. Our policy going forward after we receive
comment will hopefully tell or have items in it that we would
not want our grantees to be doing, and they include the things
that you had previously listed.
Mr. Johnson of Ohio. Dr. Collins, what do you think?
Dr. Collins. I would make the same point, that I did not
agree with the way in which the funds were spent at that time,
and going forward, we have already put policies in place that
are consistent with your point.
Mr. Johnson of Ohio. Okay. Thank you, gentlemen and ma'am,
for answering my questions.
Mr. Chairman, I yield back.
Chairman Loudermilk. The gentleman yields back. The
gentleman also has documents that he would like entered into
the official record, and I ask unanimous consent that the
documents be entered into the official record. Without
objection, they are entered.
[The information appears in Appendix II]
Chairman Loudermilk. I now recognize the gentleman from
California, Mr. Bera.
Mr. Bera. Thank you, Mr. Chairman. Thank you Ranking
Member, and thank the witnesses for being here.
I think we all agree that one of our core jobs and
responsibilities as Members of Congress is to make sure we are
stewards watching the use of taxpayer revenue. I think we agree
there.
From my perspective, the conversation here is about proper
use of management fees versus the program goals of NSF and
NEON, and I want to be very clear that I think most of us on
the Science Committee, you know, many of us in the Minority
clearly value the importance of NSF research and clearly
understand the importance of programs and projects like NEON,
which are incredibly important, particularly as the planet is
changing, as biodiversity is changing. We have to be doing this
research. I mean, in my home State of California, we are seeing
rapid change to the environment. We are seeing record droughts
that are dramatically affecting the biosphere. So again, this
hearing is not about looking at NSF as a program and the value
of that science or looking at the importance of programs like
NEON, so let us be very clear that from my perspective, these
are incredibly important programs.
That said, you know, when we--you know, I think in Dr.
Buckius's opening statement, everyone can acknowledge that
there may have been some inappropriate use of management fees,
and on a looking-forward basis, you look back, you audit, you
get a sense of where may have fees been used inappropriately,
not breaking the law but perhaps lacking good judgment, and in
an environment where folks are paying attention to how we are
using the taxpayer revenue, Dr. Buckius, it is my understanding
that again looking forward, analyzing how the funds were used
in the past, NSF is rewriting the rules, rewriting the policy
on what is appropriate use of management fee versus not
appropriate use of management fees. Is that correct?
Dr. Buckius. That is absolutely the case. We want to make
sure, as I have said a number of times, that the taxpayer
dollars are serving this country's interest in science and
engineering and therefore we believe management fees are
appropriate in order to make these kinds of efforts like NEON
functional but we don't want them to be done--or to be expended
in a way that doesn't really directly benefit the outcome of
the research that we are trying to fund.
Mr. Bera. And if I play off the testimony of my colleague
from Florida, Mr. Grayson, NEON is not the only program in the
federal government that has appropriated funds that also then
have management fees in there. So as we are looking at a single
program, is it appropriate--NSF is one of the first agencies
that is looking at developing policy on the appropriate use of
management fees versus not appropriate.
Dr. Buckius. I can't answer for other agencies. I bet they
are looking at them too. But yes, we are looking through all of
our large projects like this one in order to make sure that we
are all again investing in the right way.
Mr. Bera. So again, as we redefine what is appropriate use
of the fee, let us not limit this look just to a single agency
and a single program like NEON. You know, as Mr. Grayson
pointed out, you know, Boeing, you know, other energy
companies, et cetera gets lots of appropriated federal dollars,
and I guess Ms. Manuel, in most of those awards and
appropriated funds, is it accurate to say that there are
management fees that are part of this?
Ms. Manuel. If you are looking at something like Boeing,
those are generally procurement contracts and they are not
denominated management fees. They are known as some other type
of fee.
Mr. Bera. Okay, but they are fees?
Ms. Manuel. That is correct.
Mr. Bera. And there is no federal oversight over how those
fees are utilized?
Ms. Manuel. The primary sort of control, if you will, is
that the contractor has to have earned the fees pursuant to the
terms of the contract.
Mr. Bera. Okay. But once they earn those fees, they are
free to use them however they want?
Ms. Manuel. That is correct.
Mr. Bera. Again, what I would suggest is that we don't
narrow in and focus in on a single agency, but as we are
looking forward to be the best utilization of taxpayer dollars.
You know, as NSF is going through their forward-looking
proposals on how best to utilize those fees as well as what is
appropriate use of fees, you know, there are probably lessons
to be learned for other federal agencies and so forth. And you
know, again, I applaud the fact that there is acknowledgement
that there was poor judgment used and that NSF has taken
proactive measures going forward to make sure that we can't
dictate how someone uses their judgment but we can put in
policies and procedures to minimize misuse of funds.
With that, I will yield back.
Chairman Loudermilk. The gentleman yields back, and the
Chair recognizes the gentleman from Florida, Mr. Posey.
Mr. Posey. I thank you very much, Mr. Chairman.
At the usual risk of being vilified as anti-science for any
desire whatsoever to have some accountability and some
transparency and be a little bit of a watchdog over taxpayers'
money, I think it is appalling to many of us that so many
employees at the agencies obviously look at the federal budget
and taxpayers' money as some kind of big pinata. When you see
them spending $150,000 on liquor, parties, lobbyists, I mean,
that is the conclusion that my constituents back home would be
drawing, and they would say what are we doing about that, and
so my question, have you recovered any of the money that
apparently obviously clearly was inappropriately spent?
Dr. Buckius. So let me agree with you as a taxpayer that I
want our dollars to benefit this country, but as we have been
told, these expenditures or management fees on these kinds of
things is perfectly acceptable. I argue poor judgment. I intend
to try to make this change going forward. But so far, they are
perfectly legal.
Mr. Posey. And so NEON apparently shamelessly defends them?
Dr. Collins. As I have said in my testimony, the
individuals involved in making these decision could have used
better judgment, and going forward from here, we put in place
policies that----
Mr. Posey. I heard you say that, but if I ripped you off, I
would expect that you would say hey, I want my money back, and
I think you have ripped off the National Science Foundation and
I think the honorable thing to do would be to say hey, we are
going to give you your money back.
Dr. Collins. Well, to reiterate Dr. Buckius's point, and as
Mr. Grayson explained, your characterization that NEON had
ripped off NSF would not accord with the fact that these fees
were provided in a way that were not restricted, and we may
disagree with how they were used when in fact they were used in
a way that was consistent with OMB 122.
Mr. Posey. Well, that is pure doubletalk. I don't think we
would be here if it was appropriate behavior of any kind. On
the one hand, you are saying it is appropriate. On the other
hand, you are saying it is inappropriate, we are not going to
do it again. I mean, I am just shocked by the answer, so----
Dr. Collins. I don't want to characterize it as
appropriate, as I have said. I don't think it was invested in
the right way but it was consistent with----
Mr. Posey. Well, if you spent money that the government
entrusted to you do to thing A and you did it on thing B, which
was totally a selfish personal indulgence for which it was
never intended, should not have been intended and you admit it
should not future ever be intended, don't you think it would be
appropriate to pay the money back? I mean, just as a matter of
fair play. Forget the political doubletalk, the bureaucratic
doublespeak, just in fairness, in the real world.
Dr. Collins. Well, as I said, I am not a lawyer and I don't
have the expertise to characterize that, but the way in which--
--
Mr. Posey. I am not asking for legal opinion. I am just
talking, if you were one of my constituents, you would say hey,
if they spent the money like they weren't authorized to spend
it and it was inappropriate, I mean, who could possibly think
the National Science Foundation gave you 150,000 bucks to spend
on liquor, parties and lobbyists. I mean, does anyone in your
agency believe that that is the correct use of the money?
Dr. Collins. At this point, no.
Mr. Posey. Okay. So don't you think in all fairness you
just give the money back to begin with?
Dr. Collins. Well, the funds were invested in a way that
were consistent----
Mr. Posey. That is not invested. Invested in liquor,
parties and lobbyists, and I love your explanation of lobbyists
to--what did you say, to help educate Congressmen on the
validity of your agency? I think the first thing if you wanted
Congress to be respectful of your agency is give the government
back the money you cheated them out of.
Dr. Collins. Well, again, just to repeat, I don't feel that
the government was cheated out of the money.
Mr. Posey. Well, if was of no benefit to the government. We
have established that. It was never intended to be spent on
liquors, parties and lobbyists. We have established that. So
you got the money. If you planned to do that in the beginning,
you took it under false pretenses. If you--otherwise it was
just a matter of deception and misuse of money, of taxpayers'
money that was entrusted to you to do public good.
Dr. Collins. It would be important to stick with the
distinction that Mr. Grayson has made and Ms. Manuel has made
in terms of the way in which the fees, management fees, can be
used as opposed to appropriated funds, and the management fees
came without specific stipulation. Now, going forward we have
put very clear stipulation on the way in which those funds can
be used that are absolutely consistent with the spirit that you
are trying to bring forth here, and I agree with the spirit
that you are bringing forth here.
Mr. Posey. Well, you don't agree with the spirit I am
bringing forth because you don't have advocate repaying the
government for the money.
Dr. Collins. Well, I don't think the agency is in the
position to pay back that money because in fact the funds have
been expensed and they were used in a way that was consistent
with the policy at the time.
Mr. Posey. At the time, because there really was no policy.
Is that what you are saying?
Dr. Collins. There was not the guidance that went down to
the specific level that you have been----
Mr. Posey. And everybody thinks you should be able to spend
taxpayers' money on liquor, parties and lobbyists, right? That
is a pretty common perception. Is that a common perception in
your agency?
Dr. Collins. It is not a common perception in NEON, and as
I said, it is not my perception and it is not the decision I
would have taken, but it was the decision that was taken at the
time.
Chairman Loudermilk. The gentleman's time is expired. The
Chair now recognizes the gentleman from Virginia, Mr. Beyer.
Mr. Beyer. Thank you, Mr. Chairman. Thank you, witnesses.
I think it is important to recognize the worthiness of the
NEON Project and, you know, the climate is changing quickly and
dramatically in ways that are affecting or will affect our
lives, and the NEON project offers the capability to give us
the data we need to make wise decisions for the American
people. So I am happy that NSF and NEON are already taking
concrete steps to implement the audit's findings.
But Dr. Collins, we have heard about some of the
controversial expenses paid out of NEON's management fee
account. What are some of the less headline-grabbing expenses
you charged to the management fees and do you have other
sources of income? For example, if you wanted to pay back the
$150,000 for the party and the lobbying, could you? And in
paying for the lobbying, what was the purpose of hiring
lobbyists? How does that help the mission of NEON and the
American public?
Dr. Collins. Well, as I said, to take your last question,
in terms of the lobbying, it helps the mission as far as
providing an explanation for the importance of this sort of
investment and this sort of facility.
Now, the other kinds of things in which the fees are used
would be, for example, on helping to pay for visas for leading
scientists who would come to the country and work in this NEON
Project.
The other detail that you raised as far as other sources of
funds, there are membership fees that come from universities
that are members of the NEON Incorporated, the corporation
overseeing the NEON project.
Mr. Beyer. Could you in theory use those membership fees
from universities to repay the liquor bills for the board
meetings?
Dr. Collins. I am not a financial expert and I honestly do
not know whether those funds, again, to use a phrase that came
up earlier, are completely fungible.
Mr. Beyer. How many employees does NEON have?
Dr. Collins. 350 right now with a variable group that comes
on in the summer of about 100 to 150 temporary employees.
Mr. Beyer. Is it not an important part of management
leadership to create a culture within an organization where
people work together and are mutually supportive of and
committed to larger goals?
Dr. Collins. I would argue that it is extremely important
in any group and especially one as large as NEON.
Mr. Beyer. Do holiday parties sometimes help with that
function?
Dr. Collins. It has been my experience in 25-some-odd years
of administration that holiday parties can help with that.
Mr. Beyer. And if you didn't pay for the holiday party out
of the management fee, how would you pay for it?
Dr. Collins. Well, there would be no way by which the
corporation could pay for it. You would have to do it by
contributions from individuals.
Mr. Beyer. If I can address Ms. Manuel for a minute, is
there a legal difference in the ability of agencies to set
limits on how fees are managed by nonprofits as opposed to how
the profits are spent by other procurement agencies--the Boeing
you mentioned earlier? And will we ever have a right to ask how
Boeing spent their profits on holiday parties and lobbying?
Ms. Manuel. I think a distinction potentially could be made
insofar as you are talking about different types of agreements
and it is very clear with procurement contracts what types of
fees are allowed and what has to be done by the contractor to
earn them. It is much less clear when you are talking about
management fees under a cooperative agreement what determines
the amount of the fee and what makes it payable to the
contractor.
Mr. Beyer. Is the profit that a major for-profit contractor
like Boeing makes, is that taxpayer money?
Ms. Manuel. It is.
Mr. Beyer. I yield back, Mr. Chairman.
Chairman Loudermilk. The gentleman has yielded back. The
Chair now recognizes the gentleman from California, Mr. Knight.
The gentleman has no questions. I recognize the gentleman
from Michigan, Mr. Moolenaar. No questions.
I believe that is the extent of the questions that we have.
First, I want to thank the witnesses for their testimony. I
think it has been enlightening and will help this Committee as
we go forward.
As I indicated earlier, we have a higher responsibility in
the positions that you and I and those that are on this panel
have because we are not just dealing with money, we are dealing
with the dollars that taxpayers have sent to us and we have a
higher fiduciary responsibility to use those in a wise and
reasonable fashion that actually affects the outcome of the
purpose of which the taxpayers have sent us the money, and if
there are loopholes, which I think we have identified that
there may be--the expenditures have been identified as poor
judgment, $25,000 on holiday parties that was from taxpayers,
that--I apologize for that. If there are loopholes which we
have identified that there clearly may be loopholes, then it is
the requirement of Congress, the people have sent us here, to
make sure that those loopholes are closed and that taxpayer
monies are spent in a responsible fashion.
The record will remain open for two weeks for additional
comments and written questions from Members, but before the
Members are excused, I have been advised that Mr. Moolenaar
does want to ask a question. The gentleman is recognized for
five minutes.
Mr. Moolenaar. Thank you, Mr. Chairman. My apologies. I had
a budget meeting that I needed to attend and was not able to
hear some of the testimony, but I appreciate you being here,
and I have been listening to some of the discussion, and I
guess my question is for Dr. Buckius.
There is a--NASA and OMB have a policy that indicates that
it always that costs under federal awards must be reasonable,
allocable and allowable, and NASA indicates that paying
business expenses, costs that are not reimbursable through a
management fee would be circumventing the OMB guidelines and
therefore inappropriate, and I just wonder how you would
reconcile your position with the position of those agencies.
Dr. Buckius. So other agencies do not have the same
practices that we do. As I started off in the testimony, there
are different attributes of the various agencies. Ours is one
where we support extramural research. We don't have physical
facilities. So we have reviewed many of the other agencies'
practices and we are going to adjust ours as we go forward, but
that doesn't mean we will necessarily do exactly as they do
simply because we are just a different agency, we have
different functions.
Mr. Moolenaar. Do you think that those policies make sense
from their standpoint?
Dr. Buckius. I can imagine in their case where they might
come to that conclusion, and we have talked about our posting
in the Federal Register so we are taking input right now and
so--and we are going to close in a couple of weeks so that we
can actually then consider all these options.
Mr. Moolenaar. Do you see any problem with the policies
that they have?
Dr. Buckius. For the reasons that we have talked a little
bit, management fees do serve a very important function for
activities of nonprofits like NEON, and so curtailing,
restricting, zeroing will cause a lot of inflexibility that we
see could give us some problems but we do want to take a look
at what other people do to ensure that we have got all sides of
that.
Mr. Moolenaar. Thank you, Mr. Chairman. I yield back.
Chairman Loudermilk. The gentleman yields back.
I just want to make sure every Member has ample opportunity
to ask questions in this first and final round of questioning.
Again, I have made a closing statement but I will
reemphasize how important it is that we be extra cautious and
transparent with the expenditures of taxpayer money.
I want to again thank the witnesses for your valuable
testimony, Members of the Committee for attending, and your
questions, and at this point the witnesses are excused and the
meeting is adjourned.
[Whereupon, at 11:24 a.m., the Subcommittees were
adjourned.]
Appendix I
----------
Answers to Post-Hearing Questions
Answers to Post-Hearing Questions
Responses by Dr. Richard Buckius
[GRAPHIC] [TIFF OMITTED]
Appendix II
----------
Additional Material for the Record
Prepared Statement Submitted by Subcommittee on
Research and Technology Chairwoman Barbara Comstock
Thank you Chairman Loudermilk, for convening this hearing, and let
me congratulate you on your chairmanship and on your first hearing on
this very important topic.
While I was not here for the first NEON hearing the Committee held
in December, I have reviewed the testimony from that hearing and
familiarized myself with the relevant issues in preparation for this
hearing. The independent audit findings and other information about
management of the NEON project show some taxpayer funds that were
intended to support scientific research were diverted to problematic
activities.
The National Science Foundation and the National Ecological
Observatory Network have a Cooperative Agreement in the neighborhood of
$433 million. A relatively small amount of that amount - several
hundred thousand dollars - has been diverted to pay for things that
don't support or strengthen the project: for instance, gourmet coffee
service, tens of thousands of dollars for at least one lavish Christmas
party, and additional hundreds of thousands of dollars for lobbying
expenses.
Our national debt exceeds $17 trillion. Annual budget deficits of
several hundred billion dollars per year are driving up the national
debt at a fast clip.
Support for basic research is one of the most important areas of
federal discretionary spending. Maintaining American leadership in
science and innovation is the key to our nation's future economic
prosperity and security. Basic research is about good jobs and a secure
future. But in the current budget environment, just maintaining the
current level of basic research support is a big challenge.
Our Committee authorizes funding for groundbreaking research
financed by grants through the National Science Foundation. We have a
constitutional obligation and a responsibility to ensure every dollar
earmarked for scientific research is spent as effectively and
efficiently as possible.
We want to be strong advocates for science, but the situation we
will discuss today makes it more difficult to build and maintain
support for science funding. We want to be strong advocates for federal
support of basic research that advances science and the national
interest. But that advocacy is made more complicated when our
constituents learn of taxpayer dollars diverted to parties and
lobbying.
It may be that nothing illegal has occurred, but taxpayer money has
been spent (very) inappropriately. I look forward to hearing from NSF
and NEON representatives about what went wrong and, even more, about
what steps, including new legislation and new regulations, must be
taken to ensure these problems never happen again.
Thank you Mr. Chairman, I yield back.
Prepared Statement Submitted by Subcommittee on
Research and Technology Member Elizabeth Esty
Thank you, Chairman Loudermilk and Chairwoman Comstock, and Ranking
Member Johnson, for holding this hearing on the National Ecological
Observatory Network (NEON). I also want to recognize and thank our
witnesses from the National Science Foundation (NSF), NEON, and the
Congressional Research Service (CRS) for their time and expertise.
In the last two months we have had two hearings on NEON and NSF's
oversight of the project. We heard from five witnesses, including NSF
Inspector General Allison Lerner, and the chairman of NEON, Dr. James
Collins. These experts discussed the NEON Project's successes and
struggles since its creation in 2008. Although they were called to be
witnesses to discuss concerns regarding NSF's oversight of cooperative
agreements, the witnesses made clear that NEON has done groundbreaking
ecological sciences work, and the program will continue to inform our
understanding of large-scale ecological systems. I look forward to
working with the Committee to learn more about ecological sciences
advancements, both at NEON and across the NSF.
Submitted by Subcommittee on Research and Technology
Chairwoman Barbara Comstock
[GRAPHIC] [TIFF OMITTED]
Submitted by Subcommittee on Oversight
Chairman Barry Loudermilk
[GRAPHIC] [TIFF OMITTED]
[all]