OFFICE OF INSPECTOR GENERAL

SEMIANNUAL REPORT TO THE CONGRESS 

Number 23 

APRIL 1, 2000 TO SEPTEMBER 30, 2000 

NATIONAL ENDOWMENT FOR THE HUMANITIES 

"Democracy demands wisdom and vision in its citizens" 

-National Foundation on the Arts and the Humanities Act of 1965 

Phone 202/606-8350 Fax 202/606-8329 E-mail oig@neh.gov 

October 30, 2000 

Honorable William R. Ferris 
Chairman 
National Endowment for the Humanities 
Washington, DC 20506 

Dear Chairman Ferris: 

Enclosed is the Semiannual Report for the Office of Inspector General (OIG) for the period 
April 1, 2000  September 30, 2000. The report, which is required by the Inspector General Act as 
amended, provides an overview of the activities of the OIG during this six-month period. The Act requires 
that you transmit this report, with your Report of Final Action, to the appropriate congressional committees 
within 30 days of its receipt. 

I look forward to continuing working with you and agency managers, the NEH employees Union, Congress, 
and NEH's various stakeholders to help ensure that NEH delivers the grant awards in an economical and 
efficient manner. 

I appreciate your continued support for our office's work. 

 Respectfully,

 Sheldon L. Bernstein 
Inspector General 

Enclosure 


TABLE OF CONTENTS 

LETTER TO THE CHAIRMAN 
REPORTING REQUIREMENTS 
INTRODUCTION ............................................................................................................................... 1 
AUDIT, SURVEY, AND INSPECTION ACTIVITIES........................................................................... 2 
INVESTIGATION ACTIVITY............................................................................................................... 5 
OTHER ACTIVITIES .......................................................................................................................... 7 
TABLE I - INSPECTOR GENERAL-ISSUED REPORTS .................................................................. 9 
WITH QUESTIONED COSTS 
TABLE II - INSPECTOR GENERAL-ISSUED REPORTS WITH ....................................................... 9 
RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE 
GLOSSARY OF AUDIT TERMINOLOGY .......................................................................................... 10 


REPORTING REQUIREMENTS 

The Inspector General Act of 1978, as amended (Public Law 100-504), specifies reporting requirements for 
semiannual reports. The requirements are listed and cross-referenced to the applicable pages in this report. 

Citation Reporting Requirements Page 
Section 4(a)(2) Regulatory and Legislative Reviews 8 
Section 5(a)(1) Significant Problems, Abuses, and Deficiencies * 
Section 5(a)(2) Recommendations for Corrective Action . * 
Section 5(a)(3) Prior Significant Recommendations Unimplemented. * 
Section 5(a)(4) Matters Referred to Prosecutive Authorities. 6 
Section 5(a)(5) Instances Where Information Was Refused or Not Provided * 
Section 5(a)(6) List of Audit Reports Issued 2 
Section 5(a)(7) Summary of Significant Reports. * 
Section 5(a)(8) Audit Reports -Questioned Costs. 9 
Section 5(a)(9) Audit Report -Funds Put to Better Use... 9 
Section 5(a)(10) Prior Audit Reports Unresolved.... * 
Section 5(a)(11) Significant Revised Management Decisions.. * 
Section 5(a)(12) Significant Management Decisions with which the OIG Disagreed. * 

*= 
None this period. 


INTRODUCTION 

THE NATIONAL ENDOWMENT FOR THE HUMANITIES 

In order "to promote progress and scholarship in the humanities and the arts in the United States," Congress 
enacted the National Foundation on the Arts and the Humanities Act of 1965. This act established the 
National Endowment for the Humanities as an independent grant-making agency of the federal government 
to support research, education, and public programs in the humanities. Grants are made through four 
divisions - Research Programs, Education Programs, Preservation and Access, and Public Programs -- and 
three offices -- Challenge Grants, Enterprise, and Federal-State Partnership. 

The act that established the National Endowment for the Humanities says "The term `humanities' includes, 
but is not limited to, the study of the following: language, both modern and classical; linguistics; literature; 
history; jurisprudence; philosophy; archaeology; comparative religion; ethics; the history, criticism, and 
theory of the arts; those aspects of social sciences which have humanistic content and employ humanistic 
methods; and the study and application of the humanities to the human environment with particular attention 
to reflecting our diverse heritage, traditions, and history and to the relevance of the humanities to the current 
conditions of national life. 

THE OFFICE OF INSPECTOR GENERAL 

The NEHs Office of Inspector General was established on April 9, 1989, in accordance with the 
Inspector General Act Amendments of 1988, Public Law 100-504. In this legislation, Congress established 
Offices of Inspector General in several departments and in thirty-three agencies, including NEH. The NEH 
Inspector General (IG) is appointed by the Chairman. The independence of the IG is an important aspect of 
the Act. For example, the IG: 

= 
cannot be prevented from initiating, carrying out, or completing an audit or investigation, or from issuing 
any subpoena; 

= 
has access to all records of the agency; 

= 
reports directly to the Chairman, and can only be removed by the Chairman, who must promptly advise 
Congress of the reasons for the removal; and 

= 
reports directly to Congress. 
The Act states that the Office of Inspector General is responsible for (1) conducting audits and 
investigations; (2) reviewing legislation; (3) recommending policies to promote efficiency and effectiveness; 
and (4) preventing and detecting fraud, waste, and abuse in the operations of the agency. The Inspector 
General is also responsible for keeping the Chairman and Congress fully and currently informed of problems 
and deficiencies in the programs and operations. 

The OIG staff consists of the Inspector General, a Deputy Inspector General for Audits, two auditors, and a 
secretary. The OIG and the Office of General Counsel (OGC) have a Memorandum of Understanding 
detailing the procedures for the OIG to be provided with OGC legal services. Investigations are handled by 
the Inspector General, an auditor and as required by the agencys Deputy General Counsel (currently 
vacant). 

NEH OIG Semiannual Report 1 September 2000 


AUDIT, SURVEY, AND INSPECTION ACTIVITIES

This office is responsible for external and internal audits. External auditing includes grants, pre-award 
accounting system surveys, review of OMB Circular A-133 reports, and on-site quality assurance reviews of 
CPA work papers. Internal efforts consists of audits, inspections, and reviews/evaluations of the NEH 
administrative, programmatic, and financial operations. 

During this reporting period, the OIG received and processed 155 OMB Circular A-133 audit reports and 
issued fourteen memorandum reports containing findings (see Single Audit Act Reviews). 

LIST OF AUDIT REPORTS ISSUED 

The following is a list of audit/survey reports issued by the OIG during the reporting period. The Act requires 
us to report on the Dollar Value of Recommendations that Funds Be Put to Better Use, and the .Total 
Dollar Value of Questioned Costs (including a separate category for the dollar value of unsupported costs). 
None are reported during this period. 

INTERNAL AUDITS/REVIEW Report Number Date Issued 
Review of NEH Annual Performance Plan 
Prepared Under the Government Performance 
Results Act (The Results Act) 
OIG-00-01(IR) Draft 09/29/00 
Review of the Process and Controls of the 
NEH .My History is America's History. Project 
OIG-00-02 (IR) Draft 08/29/00 

DESK REVIEW 

Amerika Samoa Humanities Council, Inc. OIG-00-01(DR) 08/01/00 

SINGLE AUDIT ACT REVIEWS 

Georgia Humanities Council OIG-00-14 (CAA) 09/19/00 
Georgia Humanities Council OIG-00-15 (CAA) 09/19/00 
American Film Institute OIG-00-16 CAA) 09/19/00 
Idaho Humanities Council OIG-00-17 (CAA) 09/19/00 
Humanities Iowa OIG-00-18 (CAA) 09/19/00 
Humanities Iowa OIG-00-19 (CAA) 09/19/00 
Montana Committee for the Humanities OIG-00-20 (CAA) 09/19/00 
Montana Committee for the Humanities OIG-00-21 (CAA) 09/19/00 
Brown University OIG-00-22 (CAA) 09/19/00 
State of Connecticut (University of Connecticut) OIG-00-23 (CAA) 09/19/00 
New Jersey Council for the Humanities OIG-00-24 (CAA) 09/29/00 
Hawaii Committee for the Humanities OIG-00-25 (CAA) 09/29/00 
Vermont Council on the Humanities OIG-00-26 (CAA) 09/29/00 
Delaware Humanities Council, Inc. OIG-00-27 (CAA) 09/29/00 

NEH OIG Semiannual Report 2 September 2000 


SUMMARY OF REPORTS ISSUED 

INTERNAL AUDITS 

Review of the Process and Controls of the OIG-00-02 (IR) 1/ 
The NEH 
.
My History is America's History. 
Project August 29, 2000 

The objectives of the review were to 1) ascertain policies and procedures pertaining to procurement of 
printing services for the .My History is America's History. project, and 2) ascertain and evaluate 
management controls over budget and accounting information for the project. 

Our review revealed instances where procurement of printing services processed from the Government 
Printing Office was not being entered in the NEH's official requisition system. In addition, we noted that the 
technical representative's budget information was not reconciled to the official NEH accounting records. We 
made several recommendations to strengthen the management controls applicable to the process. 

Review of the NEH Annual Performance Plan OIG-00-01 (IR) 1/

 Prepared Under the Government Performance September 30, 2000 

Results Act (The Results Act) 

The objective of our review of the NEH annual performance plan was to assess the agency's progress 
towards meeting the expectations of the Results Act and to identify opportunities for the agency to refine 
and clarify the plan. 

As a framework for our review, we referred to the guide entitled, The Results Act -An Evaluator's Guide to 
Assessing Agency Annual Performance Plans, developed by the Advanced Studies and Evaluation 
Methodology group in the General Government Division of the General Accounting Office. 

To accomplish our objective we reviewed the FY 2001 Performance Plan, reviewed the NEH Strategic Plan 
for FY 1998 -FY 2002, and interviewed agency officials and staff involved with the development of the FY 
2001 Performance Plan. In order to assess the extent to which the FY 2001 Performance Plan meets the 
requirements of the Results Act and related expectations, we designed our review to address three core 
areas: 

1. Annual Performance Goals and Measures 
2. Strategies and Resources 
3. Validation and Verification 
We made numerous recommendations for the NEH's Office of Strategic Planning to consider. A major 
concern of ours is the validation process since most of the performance information is obtained from 
grantees. We believe this first review will be beneficial in moving NEH towards an improved plan that will 
showcase NEH's work. 

1/ Draft reports issued 

NEH OIG Semiannual Report 3 September 2000 


DESK REVIEWS

Amerika Samoa Humanities Council OIG-00-01 (DR) 
Dated 08/01/00 

We performed a review of the organization-wide audit report prepared by an independent public accountant, 
(IPA) for the year ended October 31, 1997. Our review indicated that the audit did not meet the 
requirements of OMB Circular A-133. The report had deficiencies that we considered material and we did 
not accept the report. The IPA will be resubmitting the report. 

SINGLE AUDIT ACT REVIEWS 

We receive audit reports on NEH grantee organizations from other federal agencies, state and local 
government auditors, and independent public accountants. These reports generally are the result of OMB 
Circular A-133 audits. The single audits report on financial activities, compliance with laws and regulations, 
and grantee management (internal) controls over federal expenditures. In most instances, the cognizant 
agency is the Department of Health and Human Services, the federal agency with the predominant financial 
interest. 

During this period we received and processed 155 audit reports. Fourteen reports contained findings. We 
are continuing our follow-up work on these. In addition, we expended considerable effort in determining 
which grantees have not submitted OMB Circular A-133 audit reports. Several organizations do not have 
sufficient funds for audits by independent public accountants. The OIG is working with these organizations 
and their independent public accountants to develop an appropriate cost-effective audit approach. 

To ensure that we receive OMB Circular A-133 audit reports from the state humanities councils in a timely 
manner, we sent an e-mail message to all of the executive directors and Board chairpersons. We will 
continue to send reminders to the state councils. 

A-133 COMPLIANCE SUPPLEMENT 

State humanities councils that receive at least $300,000 per year are subject to Office of Management and 
Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.. We have 
worked with OMB updating the compliance supplement for state humanities councils, which is part of the 
OMB Compliance Supplement. 

PEER REVIEW 

During this period we began a review of the OIG of the Commodity Futures Trading Corporation and the 
OIG of the U.S. International Trade Commission began a review of our organization. The review is required 
by the IG Act, as amended, and covers the audit operations of the OIG. 

NEH OIG Semiannual Report 4 September 2000 


INVESTIGATION ACTIVITY

The Inspector General Act provides the authority for the Office of Inspector General to investigate possible 
violations of criminal or civil laws, administrative regulations, and agency policies, which relate to the 
programs and operations of the NEH. The OIG Hotline, E-mail address, and regular mail are efficient and 
effective means of receiving allegations or complaints from employees, grantees, contractors, and the 
general public. The OIG has obtained assistance from other OIGs, the Federal Bureau of Investigation, the 
Postal Inspection Service, and other investigative entities as applicable. 

When the OIG receives a complaint or allegation of a criminal or administrative violation, we make a 
determination of the appropriate action to take. This can be an audit, an investigation, a referral to another 
NEH office or division, or a referral to another federal agency. 

Since the Reduction-In-Force that occurred in the last quarter of calendar year 1995, NEH employees have 
contacted the OIG on matters that should have been brought to the attention of the Office of Human 
Resources and the Office of Equal Employment Opportunity. 

As of April 1, 2000, one matter was open in the Investigation branch of the OIG. This was closed during the 
current period. During the six months ending September 30, 2000, we received ten .Hotline. contacts. 

One Case Open at Beginning and Closed 

We received a complaint from two employees of a grantee's staff stating that the former executive director 
mismanaged the organization. Our review disclosed no illegal activity, although we found that funds were 
mismanaged causing the organization to basically discontinue operations. 

Contacts During This Period 

Several of the complaints concerned e-mail; from misuse of the NEH e-mail system to unwanted e-mail 
(including pornography). One matter dealt with political activity and the agency's General Council referred it 
to the Office of Special Counsel. The other contacts were referred to other offices or other federal agencies. 

As of September 30, 2000, all matters have been closed. 

NEH OIG Semiannual Report 5 September 2000 


MATTERS REFERRED TO PROSECUTIVE AUTHORITIES 

No new cases were referred for criminal prosecution. 

HOTLINE AND PREVENTION ACTIVITIES 

We maintain a local Hotline phone number, agency E-mail address, and an Internet address. We maintain 
all three to provide additional confidentiality for those persons bringing matters to the attention of the OIG. 

We continue to issue agency-wide E-mail messages to NEH staff informing them of the violations that 
should be reported to the OIG. We use E-mail messages to inform NEH staff about the OIG operations 
several times during the year. Posters advising staff to contact the OIG are posted throughout the agency 
building. 

Anonymous E-mail 

We now have on the NEH Intranet and the Internet a system for staff, grantees, contractors, etc., to report 
waste, fraud, abuse, and mismanagement in an anonymous manner. 

Investigation Activity 

Open at beginning of period 1 
Matters brought to the OIG during the reporting period 10 
Total Investigative contacts 11 
Closed or referred during reporting period 11 
Open at end of period 0 

NEH OIG Semiannual Report 6 September 2000 


OTHER ACTIVITIES 

INDIRECT COST RATE NEGOTIATIONS/REVIEWS 

Grantees are entitled to recover total project costs, both direct and indirect. Indirect costs are those costs of 
an organization or institution that are not readily identifiable with a particular project or activity but are 
nevertheless necessary to the general operation of the organization or institution and the conduct of the 
activities it performs. 

The cost of office supplies, general telephone, postage, accounting, and administrative salaries are types of 
expenses usually considered as indirect costs. In theory, all such costs might be charged directly; practical 
difficulties, however, preclude such an approach. Therefore, they are usually grouped into a common 
pool(s) and distributed to those organizational or institutional activities that benefit from them through the 
expedient of an indirect cost rate(s). 

Cognizant federal agencies approve the rates after reviewing cost allocation plans submitted by grantees. 
The approved rate will generally be recognized by other federal agencies. 

During this period, we negotiated indirect cost rates with eleven grantees. 

INDIRECT COST RATE DESK REVIEW REPORTS ISSUED 

Grantee Report Number Date Issued 

New Images Productions, Inc. OIG-00-04 05-09-2000 
American Historical Association OIG-00-05 06-15-2000 
New York Public Library OIG-00-06 06-23-2000 
Mystic Seaport Museum OIG-00-07 08-24-2000 
Newberry Library OIG-00-08 09-21-2000 
Newberry Library OIG-00-09 09-21-2000 
Filmmakers Collaborative OIG-00-10 09-25-2000 
Saint Thomas Foundation OIG-00-11 09-25-2000 
Station Resource Group OIG-00-12 09-25-2000 
Unicorn Projects OIG-00-13 09-29-2000 
Educational Film Center OIG-00-14 09-29-2000 

INTRA-AGENCY COOPERATION 

In this period, OIG staff attended and engaged in various NEH meetings - panel meetings (where grant 
applications are reviewed by outside consultants), pre-council meetings (where the program divisions 
discuss the panel review results with the chairman and his immediate staff), and the National Council 
meeting. In addition, the IG attended the chairman's monthly policy group meetings. OIG staffperson 
attended monthly NEH Employee Association Meetings. The staff were also involved in the review of NEH 
administrative directives. 

The Office of Inspector General contributes to the discussions; however, the office does not participate in 
policy making. 

NEH OIG Semiannual Report 7 September 2000 


CONGRESSIONAL REQUESTS 

We received and responded to several requests from both Senators and Congressmen. 

PARTICIPATION ON THE EXECUTIVE COUNCIL ON
INTEGRITY AND EFFICIENCY

The Executive Council on Integrity and Efficiency (ECIE) was established by the President in 1992 to 
coordinate and implement government-wide activities to combat fraud and waste in federal programs and 
operations. OIG staff regularly attend ECIE meetings and provide information to the ECIE. 

REGULATORY AND LEGISLATIVE REVIEWS 

The Inspector General Act of 1978, as amended, requires the Office of Inspector General to review 
proposed legislation and regulations. The reviews are made to assess whether the proposed legislation or 
regulation (1) impacts on the economy and efficiency of Endowment programs and operations, and (2) 
contains adequate internal controls to prevent and detect fraud and abuse. During this period we provided 
the ECIE with comments on various matters affecting the OIG community. 

OIG INTERNET AND INTRANET 

The OIG has listed several semiannual reports on the internet. The reports are accessible through the 
Inspectors General homepage (http://www.ignet.gov/ignet/internal/neh/html). The reports link to the NEH 
homepage (http://www.neh.gov/html/oig/. To access the semiannual reports from outside the NEH, enter 
the URL http://www.ignet.gov. 

To enhance NEH staff's recognition of our mission and responsibilities, we provide links to several other 
federal agencies such as the Office of Management and Budget, the General Accounting Office, the Office 
of Government Ethics, and the IGNET. 

A-133 WAIVER ISSUED BY NEH 

NEH has waived the A-133 audit requirement for grants awarded in the Centers Program and the 
International Program. The reasons for dropping the A-133 audit requirement for Centers grants ".... was 
the fact that our support of these projects was limited to publicity, selection costs, and the actual fellowship 
stipends, with the majority of funding going to stipends. Since we know who are selected as fellows, what 
their projects are, and how much they receive in the way of NEH support, we saw no reason to insist on an 
audit of these grants. We are now recommending the same approach for the International Program 
because, except for a small amount of funding for administrative costs, the use of NEH funds is limited to 
publicity, selection costs and stipends." 1/ 

OMB Circular A-133 is guidance on how to implement the Single Audit Act Amendments of 1996. It is the 
OIG's position that NEH does not have any provision in its reauthorizing legislation or its annual 
appropriation that gives it authority to waive A-133 audit requirements. We have requested that the NEH 
Office of General Counsel provide the OIG with an opinion on the propriety of the A-133 waiver. We 
expected a written opinion by the end of May 1999. 

A draft opinion was received in September 2000, recognizing that NEH did not have the authority to waive 
the A-133 audit requirements for particular grantees or organizations. 

1/ Memorandum of Director of Grants Office to Deputy Chairman. 

NEH OIG Semiannual Report 8 September 2000 


TABLE 
I
INSPECTOR GENERAL-ISSUED REPORTS 
WITH QUESTIONED COSTS DOLLAR VALUE 

A. For which no management decision has been made by the 
commencement of the reporting period. 
Number 
Of Reports 
- 0 - 
Questioned 
Cost 
$ - 0 - 
Unsupported 
Cost 
$ - 0 
B. Which were issued during the reporting period - 0 - - 0 - -0 -
Subtotals (A+B) - 0 -$ - 0 -$ -0 -
C. For which a management decision was made during the 
reporting period. 
i. Dollar value of disallowed costs. - 0 -$ - 0 - $ -0 -
ii. Dollar value of costs not disallowed (grantee 
subsequently supported all costs). 
- 0 -$ - 0 - $ -0 -
D. 
. 
For which no management decision has been made by 
the end of the reporting period 
- 0 -$ - 0 - $ -0 -
E. Reports for which no management decision was made 
within six months of issuance. 
- 0 -$ - 0 -$ - 0 

TABLE II 
INSPECTOR GENERAL-ISSUED REPORTS 
WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE 

Number Dollar 
of Reports Value 

A. 
For which no management decision has been made by the commencement of - 0 - $ - 0 - 
the reporting period. 
B. 
Which were issued during the reporting period. - 0 - $ -0 - 
C. 
For which a management decision was made during the reporting period. - 0 - $ - 0 - 
i. 
Dollar value of recommendations that were agreed to by - 0 - $ - 0 - 
management. 
ii. 
Dollar value of recommendations that were not agreed to by - 0 - $ - 0 - 
management. 
D. For which no management decision was made by the end of the reporting period. - 0 - $ - 0 
NEH OIG Semiannual Report 
9 
September 2000 


GLOSSARY OF AUDIT TERMINOLOGY

Questioned Cost - A cost that is questioned by the OIG because of an alleged violation of a provision of a 
law, regulation, contract, grant, cooperative agreement, or other agreement or document governing the 
expenditure of funds; because such cost is not supported by adequate documentation; or because the 
expenditure of funds for the intended purpose is unnecessary or unreasonable. 

Unsupported Cost -A cost that is questioned because of the lack of adequate documentation at the time of 
the audit. 

Disallowed Cost - A questioned cost that management, in a management decision, has sustained or 
agreed should not be charged to the government. 

Funds Be Put To Better Use - Funds, which the OIG has disclosed in an audit report, that could be used 
more efficiently by reducing outlays, de-obligating program or operational funds, avoiding unnecessary 
expenditures, or taking other efficiency measures. 

Management Decision - The evaluation by management of the audit findings and recommendations and 
the issuance of a final decision by management concerning its response to such findings and 
recommendations. 

Final Action - The completion of all management actions, as described in a management decision, with 
respect to audit findings and recommendations. When management concludes no action is necessary, final 
action occurs when a management decision is made. 

Source: Excerpt from Section 106(d) of the Inspector General Act Amendments of 1988 (P.L. 100-504). 

NEH OIG Semiannual Report 10 September 2000 


THE OFFICE OF INSPECTOR GENERAL 

serves American taxpayers 
by investigating reports of waste, fraud,
mismanagement, abuse, integrity violations or
unethical conduct involving federal funds.

To report any suspected activityInvolving NEH programs, operations, or employees 

Please Call 

(202) 606-8423 
or, 

Write 

Office of Inspector General-Hotline 
National Endowment for the Humanities 
1100 Pennsylvania Ave. N.W., Room 419 
Washington, DC 20506 

FAX: (202) 606-8329 

ELECTRONIC MAIL HOTLINE 
OIG@neh.gov 

 Government employees are protected from reprisal 
 Caller can remain anonymous 
 Information is confidential