BFA Update National Science Foundation Advisory Committee for Business and Operations November 18, 2004 Tom Cooley NSF Chief Financial Officer Director, Office of Budget, Finance, and Award Management

Major Events Since March ‘04 BFA Realignment – Completed –Now 5 Divisions (previously 4) –Enhances focus on award monitoring and handling of complex awards. Advisory Committee for GPRA Performance Assessment – June –Significant Achievement by NSF for all four strategic outcome goals. –Incorporated findings re: Organizational Excellence from June AC/B&O teleconference.

Major Events (continued)

FY 2004 Performance and Accountability Report Submitted Nov. 15 Clean Opinion Two Reportable Conditions –Post-Award Administration –Contract Monitoring

Unfolding Issues FY 2005 Appropriations –Full Year CR? –Omnibus? –Funding for NSF? –Proposed change in funding for IPAs? FY 2006 Budget Process –Outlook for Domestic Discretionary? Breaking News: NSF CFO to chair new CFO Council Committee on “Grants Governance”

Cost Sharing: Update Historical Perspective: –NSF’s use of cost sharing was derived from the desire to bring additional resources into the R&D enterprise from outside sources. –Cost sharing also was viewed as a valuable mechanism for affirming the longstanding partnership between colleges and universities and the Federal government. –Over the past 5 years, NSF and the NSB have continued to discuss and reexamine this paradigm to best determine how and when the Foundation would require cost sharing in its programs.

Cost Sharing Data: FY FiscalC/S Dollars AwardsTotal Award% YearActions FY2000$508M310919, FY2001$534M , FY2002 $419M , FY2003$325M , FY2004$244M155622,

The Management Challenge on Cost Sharing from the OIG Audits continue to reveal problems with cost sharing that include: –Shortfalls in contributions; –Instances of missing or insufficient documentation; and –Systems that are inadequate to ensure their proper accounting. OIG recommends that NSF reexamine its policies on the reporting of cost sharing and resolving of any questioned costs to better ensure compliance with Federal guidelines.

Research Business Models General Public Comments Relating to Costs A high priority is to strive to return to a costing and regulatory system that is equitable, effective, and appropriately reflects diversity of research providers, even more pressing than to articulate new business models The principle of full cost reimbursement is vital to the partnership The two central considerations (in the research partnership) are: 1. costs, including how they are charged and compensated; and 2. administrative regulations, including how they are imposed and complied with

A New Perspective on Cost Sharing…. Compliance mandates for universities and research institutions have increased substantially over the last ten years –Patriot Act, Select Agents, VISAs, Human Subjects, HIPAA, Export Controls, Environmental Health and Safety Many recipient institutions are at or above the administrative cap in F&A and do not recover these increased costs of compliance –85% of major universities are at or above the cap –20 of these institutions lost about $46M in under- recovery in FY2000 –25 universities estimated they would spend $411M total or $16.5M per institution for increased compliance year

A New Perspective on Cost Sharing (Cont’d) Many small, baccalaureate, and minority serving institutions do not have the financial resources to cover the costs of compliance and participate in cost sharing: –Testimony from small institutions in the RBM process addressed the tradeoff between hiring faculty versus participating in cost sharing in order to apply for NSF instrumentation support or other initiatives; and –These dilemmas will increasingly drive a “have and have not situation” among institutions The original premise behind imposition of cost sharing (the addition of resources to the research enterprise) no longer appears valid.

Options Presented to NSF Senior Mgmt. Maintain the status quo; Permit imposition of cost sharing only for certain types of awards: –Instrumentation/infrastructure; and/or –Centers/Facilities; and/or –Instructional materials/curriculum development; or Permit imposition of statutory cost sharing requirements only, thereby eliminating all program specific cost sharing

Recommendation NSF recommends that the NSB approve a revision to the current Board policy on cost sharing to eliminate program specific cost sharing, and require ONLY statutory cost sharing. Adopted by NSB – October 2004