The document provides an update and clarification regarding the resolution of an NSF Office of Inspector General (OIG) audit finding related to the application of Facilities & Administrative (F&A) cost rates on NSF awards, as discussed during a recent NIH/NSF panel session. The concern stemmed from situations where an institution proposes an F&A cost rate during the grant application process, but by the time of the award, a new, higher F&A rate has been negotiated. In such cases, institutions often maintain the originally proposed (lower) F&A rate to preserve the PI’s proposed direct cost allocations, with no financial disadvantage to NSF. Following audit findings that questioned this practice, the National Science Foundation’s Management Response, dated December 2, 2021, affirmed support for the prevailing institutional policy and did not sustain the OIG’s audit finding. NSF clarified that while grantees must adhere to internal controls to prevent charging above the negotiated rate at the time of the award, they are not required to retroactively adjust to a higher rate negotiated after proposal submission.
Additionally, the document corrects a misstatement from the previous COGR November 2021 Update, clarifying that NSF’s Jean Feldman did not indicate that a Management Decision Letter would be issued regarding this matter. The communication concludes with an apology for any confusion from this prior inaccuracy and provides contact information for further inquiries. Overall, the NSF’s response brings resolution to the audit finding, affirming current institutional practices while emphasizing the importance of compliance controls to avoid excessive indirect cost charges to awards.
