"Democracy demands wisdom and vision in its citizens"
           National Foundation on the Arts and Humanities Act of 1965 

                       Office of Inspector General

                                SEMIANNUAL 
                                 REPORT TO 
                                 CONGRESS 

           For the Period October 1, 2007, through March 31, 2008 

                              Report No. 38 

                         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 activity 
                 involving NEH programs, operations, or employees 

                              Call the OIG Hotline 

                                1 (877) 786-7598

                                 Mailing Address 

                       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 

* * * * * * * * * * * * * *

                                     NATIONAL ENDOWMENT FOR THE HUMANITIES
                                     OFFICE OF INSPECTOR GENERAL 
                                     1100 PENNSYLVANIA AVE., NW, ROOM 419
                                     WASHINGTON, D.C. 20506 
                                     TELEPHONE(202) 606-8350 
                                     FACSIMILE (202) 606-8329 
                                     E-mail oig@neh.gov 

                               April 30, 2008

Honorable Bruce Cole
Chairman
National Endowment for the Humanities
Washington, DC 20506

Dear Chairman Cole:

I am pleased to provide you with the Office of Inspector General's 
Semiannual Report to Congress for the first half of fiscal year 2008.  
The report is submitted in accordance with the Inspector General Act of 
1978, as amended.  Section 5 of the Act requires that you submit this 
report, with your Report of Final Action, to the appropriate committee or 
subcommittee of the Congress within 30 days of its receipt.  The report 
provides a summary of the activities of the OIG during the six-month 
period ended March 31, 2008.

During the current period, OIG auditors completed and issued final 
reports concerning NEH and grantee operations.  Internally, we reviewed 
proposed solutions to findings cited in our FISMA review of the Oracle 
Accounting System.  We transmitted the final report issued by Leon Snead 
& Company, P.C. in which an unqualified opinion was expressed on the NEH 
fiscal year 2007 financial statements.  External effort consisted of 
three desk reviews of grantee compliance with Office of Management and 
Budget Circular A-122 concerning support of salaries and wages; six 
reviews of grantee overhead rates; and review of 25 OMB Circular A-133 
audit reports.  

In our investigations program, we had two matters open as of the 
beginning of the reporting period.  We received six "Hotline" contacts 
during the period.  As of March 31, 2008, seven matters remain open.

Significant progress has been made concerning the segregation of duties 
material weakness noted during prior audits of the agency's financial 
statements.  The NEH Accounting Office, with help from the Office of 
Information Resources Management and the Office of Administrative 
Services, has made significant progress with the Oracle Accounting System.  
I appreciate your support and look forward to working with you and all 
agency staff to further our common purpose of assuring the effectiveness, 
efficiency and integrity of NEH's vital contributions to the humanities.  
Sincerely,

Sheldon L. Bernstein
Inspector General

* * * * * * * * * * * * * *

                          TABLE OF CONTENTS 

LETTER TO THE CHAIRMAN 

MESSAGE FROM THE INSPECTOR GENERAL....................................  1 

THE NATIONAL ENDOWMENT FOR THE HUMANITIES.............................  2 

THE OFFICE OF INSPECTOR GENERAL.......................................  2 

AUDIT AND REVIEW ACTIVITIES ..........................................  3 

INVESTIGATIVE ACTIVITIES..............................................  7 

OTHER ACTIVITIES......................................................  9 

PRIOR AUDIT REPORTS UNRESOLVED........................................ 11 

TABLE I - REPORTING REQUIREMENTS...................................... 12 

TABLE II - INSPECTOR GENERAL-ISSUED REPORTS
     WITH QUESTIONED COSTS............................................ 13 

TABLE III - INSPECTOR GENERAL-ISSUED REPORTS WITH 
     RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE.................. 13 

GLOSSARY OF AUDIT TERMINOLOGY ........................................ 14 

                   MESSAGE FROM THE INSPECTOR GENERAL

Over the past several years, our workload has constantly increased in 
volume and complexity and, as a consequence, oversight of the Endowments 
grantees by the OIG is diminishing.

The OIG is responsible for contracting with and reviewing the work of an 
independent public accountant that conducts the annual financial statements 
audit.  The audit is required by the Accountability of Tax Dollars Act of 
2002, and applies to many small agencies as well as the Endowment.  The 
Federal Information Security Management Act (FISMA) review has been 
performed for several years as required.  Each year the Office of Management 
and Budget (OMB) issues guidance for the review.  The National Institute for 
Standards and Technology (NIST) Computer Security Division issues 
publications that the agency is responsible for implementing.  The OIG is 
responsible for reviewing the agencys implementation.  The General 
Accountability Office and the Presidents Council on Integrity and Efficiency 
periodically update their various guidance on auditing, inspections and 
reviews, and investigations.  This increases the burden on the OIG.  

OMB Circular A-133, Audits of States, Local Governments and Non-Profit 
Organizations, issued pursuant to the Single Audit Act of 1984, (as 
amended), sets forth audit guidance applicable to the expenditure of 
Federal awards by non-Federal entities.  The threshold for an audit is the 
expenditure of $500,000 or more in a fiscal year.  Consequently, the 
threshold level eliminates audits for a significant number of non-profit 
organizations that receive grants from the Endowment, including 
approximately 17 of the 56 state humanities councils.  The Presidents 
Council on Integrity and Efficiency issued a report on the single audits.  
The report disclosed that a majority of the work performed on OMB Circular 
A-133 audits did not meet professional standards.  Thus, besides having 
fewer NEH grantees subject to the OMB A-133 audit, the reports issued are 
not totally reliable.  This clearly indicates that the OIG needs more 
resources to provide adequate coverage of grantees.

Another impact on our oversight of grantees is internal and grantee 
investigations.  Opening an investigation has a significant impact on our 
audit plan because we do not have staff dedicated to investigation work.  
Therefore, it becomes necessary to reassign audit staff trained in 
investigation work to perform the investigation.  With significant 
fluctuations on a yearly basis, it is difficult to be proactive in 
investigations or realistically budget staff time for this effort.  Also, 
during the past several years, the NEH Office of General Counsel has 
operated with fewer staff than previously. The deputy general counsel is 
also the General Counsel to the IG. Therefore, we have been operating 
without counsel for some time.

Our suggested solution concerning these issues is to enter into contracts 
for a part-time attorney and a part-time auditor. Both positions would 
require the individuals to have prior Federal government service in a 
department or agency that engages in grant making. 

NEH OIG Semiannual Report               1                      March 2008

* * * * * * * * * * * * * *

                   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 two 
offices -- Challenge Grants and Federal-State Partnership.  The divisions and 
offices also administer the We the People: NEHs American History initiative.  

The NEH has a new initiative  Picturing America.  This program " provides 
an innovative way for citizens of all ages to explore the history and 
character of American through some of our nations greatest works of art.  
Images of people, places and events from American history give citizens 
everywhere a chance to better understand our countrys past and the 
principles for which it stands."  Information can be found at 
http://PicturingAmerica.neh.gov.

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 NEH Office of Inspector General was established April 9, 1989, in 
accordance with the Inspector General Act Amendment of 1988, (Public  Law 
100-504).  In this legislation, Congress established Offices of Inspector 
General in several departments and in thirty-three agencies, including the 
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, Deputy Inspector General, 
two auditors, and a secretary.  The OIG and the Office of the 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.

NEH OIG Semiannual Report               2                      March 2008
                            AUDIT AND REVIEW ACTIVITIES

                              LIST OF REPORTS ISSUED

This office is responsible for external and internal audits.  External 
auditing includes grants, pre-award accounting system surveys, review of 
OMB Circular A-133 audit reports, overhead desk reviews, limited scope desk 
reviews, and on-site quality control reviews of CPA workpapers.  Internal 
efforts consist of audits, inspections, and reviews/evaluations of NEH 
administrative, programmatic, and financial operations.

Following is a list of reports issued by the OIG during this reporting period.  
The Inspector General Act of 1978, as amended, 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), [see Table II].  

                                            Report Number      Date Issued
                                            -------------      -----------
INTERNAL AUDITS/REVIEWS

   Final Audit Report
     Financial Statement Audit FY 2007   Advisory Memorandum      11/08/07

   Closing of the Findings for FISMA 
      Review - Oracle Accounting 
      System Review                         OIG-08-01 (IR)        03/27/08

EXTERNAL AUDITS/REVIEWS

   American Philosophical Society           OIG-08-01 (DR)        02/13/08
   Library of America	                    OIG-08-02 (DR)        02/14/08
   Save Ellis Island!                       OIG-08-03 (DR)        02/20/08

   OVERHEAD DESK REVIEWS

   Foundation of the American Institute 
      for Conservation of Historic and 
      Artistic Works                       NEH-08-01 (ODR)        02/15/08 
   Huntington Library                      NEH-08-02 (ODR)        02/15/08
   Oregon Historical Society               NEH-08-03 (ODR)        02/15/08
   American Philosophical Society          NEH-08-04 (ODR)        02/20/08
   Virginia Historical Society             NEH-08-05 (ODR)        02/15/08
   New York Public Library                 NEH-08-06 (ODR)        03/12/08

   SINGLE AUDIT ACT REVIEWS	

   25 OMB Circular A-133 Reports                      - see Page 7 -

NEH OIG Semiannual Report               3                      March 2008

* * * * * * * * * * * * * *

                            AUDIT AND REVIEW ACTIVITIES
                             SUMMARY OF REPORTS ISSUED
                              INTERNAL AUDITS/REVIEWS
                                 Final Audit Report
                    Financial Statement Audit Fiscal Year 2007
                                  November 8, 2007

We issued a memorandum transmitting the final report on the audit of the 
fiscal year 2007 financial statements of the National Endowment for the 
Humanities.  The OIG engaged Leon Snead & Company, P.C., (IPA) to perform 
the audit as required by the Accountability of Tax Dollars Act of 2002.  
The OIG was responsible for 1) evaluating the qualifications and 
independence of the auditors; 2) reviewing the auditors approach and 
planning of the audit; 3) monitoring the work of the auditors; 4) examining 
audit workpapers and reports to ensure compliance with Government Auditing 
Standards, OMB Bulletin No. 06-03, Audit Requirements for Federal Financial 
Statements, and the Financial Audit Manual issued jointly by the Government 
Accountability Office (GAO) and the Presidents Council on Integrity and 
Efficiency (PCIE); and 5) other procedures deemed necessary to oversee the 
contract and the audit. 
 
The IPA expressed an unqualified opinion on the NEH financial statements as 
of and for the years ended September 30, 2007 and 2006.  The IPAs testing 
of internal controls identified no material weaknesses in financial 
reporting.  The results of the IPAs tests of compliance with certain 
provisions of laws and regulations disclosed no instances of noncompliance 
required to be reported.  

However, the IPA identified a significant deficiency in internal control 
related to the NEH system access authorities.  The IPA noted that NEH has 
made significant progress in separating incompatible duties and in 
implementing systems-enforced separation of incompatible duties.  (The IPA 
originally reported a material weakness in control related to separation of 
incompatible duties in the reports on the audits of the agencys financial 
statements for fiscal years 2005 and 2006.)  The IPA acknowledged that the 
agency has additional plans to refine those controls.  However, the IPA 
recommended that the agency implement further controls to improve access 
security.

Closing of the Findings for Federal Information Security Act (FISMA) Review
                   Oracle Accounting System Review
                    March 27, 2008; OIG-08-01 (IR)

The purpose of our review was to ensure that the proposed solutions to our 
findings reported for the fiscal year 2006 FISMA review concerning the Oracle 
Accounting System were adequate and resolved the findings to our satisfaction.  
The scope of our review was limited to the findings in the FISMA report and 
inspection of the solutions proposed to resolve those findings.  We reviewed 
the material supporting the proposed solutions as supplied to us by the 
Director of the Accounting Office and the Systems Accountant.  We also met 
with the Director of Accounting and the Systems Accountant to discuss the 
proposed solutions and, where applicable, we obtained and reviewed available 
supporting documentation from the agencys information system.  Finally, we 
researched the Grants Management System (GMS) scripting process that uploads 
grant information into Oracle, and the system used to upload payroll 
information from the National Finance Center (NFC) into Oracle.

Based on our review, we concluded that the proposed solutions are adequate 
and satisfactorily address our findings in the fiscal year 2006 FISMA 
report.  However, we made specific recommendations that would strengthen 
the proposed solution concerning use of the system generated reports as an 
additional control to address the separation of duties finding.

NEH OIG Semiannual Report               4                      March 2008
* * * * * * * * * * * * * *

                            AUDIT AND REVIEW ACTIVITIES

                              EXTERNAL AUDITS/REVIEWS

During the six-month period ending March 31, 2008, we reported on the 
results of our desk reviews concerning the following organizations:

     o   American Philosophical Society [ OIG-08-01 (DR) ]
     o   The Library of America [ OIG-08-02 (DR) ]

The objective of each desk review was to assess the adequacy of the time 
and effort accounting policies and procedures implemented by the respective 
organizations to ensure compliance with OMB Circular A-122, Cost Principles 
for Non-Profit Organizations.  The desk reviews were performed in accordance 
with PCIE/ECIE Quality Standards for Inspections.     

                           American Philosophical Society
                         OIG-08-01 (DR); February 13, 2008

Based on the results of our review and our understanding of the 
organizations time and effort accounting policies and procedures, we 
concluded that procedures are in place at the American Philosophical 
Society that would ensure compliance with the requirements set forth in OMB 
Circular A-122 concerning support of salaries and wages.  However, we 
observed that the personnel activity reports included in our desk review 
reflected effort allocations consistent with budgeted effort allocations.  
We noted in our communication to the organization that this gives the 
appearance that budgeted levels of effort are being used to allocate actual 
salaries to the project currently being supported by an NEH grant.  We 
advised the organization that budget estimates do not qualify as support of 
salaries and wages either claimed for reimbursement from awarding agencies 
or used in meeting cost sharing or matching requirements on Federal awards.

                              The Library of America
                         OIG-08-02 (DR); February 14, 2008

We concluded, based on the results of our review, that the organizations 
time and effort accounting policies and procedures are adequate to ensure 
compliance with the requirements set forth in OMB Circular A-122 concerning 
support of salaries and wages.  However, there were employee personnel 
activity reports (PARs) included in our desk review that did not appear to 
be maintained in accordance with the organizations policies and procedures.  
We observed instances where employee PARs were signed and dated months after 
the end of the periods represented by the PARs.  There were also instances 
where the dates of the employees signature and the supervisors signature 
were months after the end of the applicable quarter.  We communicated to the 
organization that this condition adversely affects the timeliness and 
integrity of quarterly postings to the general ledger as prescribed by the 
organizations policy and procedures.  We advised that the PAR should be 
certified prior to its use as a basis for salary allocations to projects 
supported by Federal awards.

                                 Save Ellis Island!
                        OIG-08-03 (DR); February 20, 2008

We completed a follow-up desk review to test the corrective action 
implemented by Save Ellis Island! in response to observations noted in our 
prior review of the organizations time and effort accounting policies and 
procedures.  During our initial review, we observed that the timesheets, as 
prepared by employees, were not being used as the basis for charges to NEH 
grants.

We have concluded, based on the results of our follow-up review, that the 
organizations revised time and effort accounting procedures establish the 
usefulness of the employee timesheets as the basis for charges to NEH 
grants which satisfies the requirements set forth in OMB Circular A-122 
concerning support of salaries and wages.

NEH OIG Semiannual Report               5                      March 2008

* * * * * * * * * * * * * *

                            AUDIT AND REVIEW ACTIVITIES

                               Overhead Desk Reviews

The OIG performs overhead desk reviews (ODRs) for grantees requiring 
indirect cost rates.  The reviews are done in accordance with the 
PCIE/ECIE Quality Standards for Inspections.  The OIG sends the results of 
the ODRs to the Assistant Chairman for Planning and Operations, who 
negotiates the indirect cost rates with the grantees.  We completed six 
reviews during this period. (See page 3).

                             Single Audit Act Reviews

During fiscal year 2007, more than 80 percent of NEHs expenditures were 
payments made to grantees.   The Single Audit Act Amendment of 1996 covers 
many NEH grantees.  Grantees expending $500,000 or more in Federal dollars 
per annum are required to obtain an OMB Circular A-133 audit.  The objective 
of the audit is to determine whether the recipients expend Federal funds 
according to applicable laws and regulations.  The OIG receives OMB Circular 
A-133 reports from other Federal agencies (primarily the Department of 
Health and Human Services), state and local government auditors, independent 
public accountants, and grantees.  

During the six-month period ended March 31, 2008, we reviewed 25 OMB 
Circular A-133 audit reports.  None of the reports contained findings that 
required reporting by the OIG to NEH management.  

                               WORK IN PROGRESS

Review of Office of Grant Management (OGM) Training for New Staff

One of the management challenges as of September 30, 2007, was that several 
OGM staff with over 30 years experience were retiring.  Another staff 
person retired during the previous year.  The OGM has recently hired 
personnel who previously worked in other offices within the agency, with no 
grant management experience.  Our preliminary work indicates that the OGM 
has provided initial training to new staff through experienced qualified 
training organizations.

Inspection ~ Newport Historical Society

The objectives of this inspection are to (1) assess the eligibility of 
gifts certified to release matching funds under a challenge grant awarded 
to Newport Historical Society (the Society); and (2) determine if the 
Society is using the income from the NEH-supported endowment in accordance 
with the budget submitted to and approved by NEH.

Desk Review of Documentation Related to Salaries and Wages Charged to NEH 
Grants ~ The OASIS Institute

The objective of this desk review is to assess the adequacy of the time and 
effort accounting policies and procedures implemented by The OASIS Institute 
to ensure compliance with OMB Circular A-122, Cost Principles for Non-Profit 
Organizations.

Pre-Award Telephone Survey ~ The Walters Art Museum

The objective of this telephone survey is to obtain information to 
determine the adequacy of the organizations accounting system, management 
controls, and policies and procedures designed to administer grant funds.

Overhead Desk Reviews

     o   The OASIS Institute
     o   Southeastern Library Network, Inc. (SOLINET)
     o   Iraq Memory Foundation

NEH OIG Semiannual Report               6                      March 2008

* * * * * * * * * * * * * *

                             INVESTIGATIVE ACTIVITIES

                                    BACKGROUND

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 necessary.

When the OIG receives a complaint or allegation of a criminal or 
administrative violation, we make a determination of the appropriate 
action to take.  The result could be an audit, an investigation, a referral 
to another NEH office or division, a referral to another Federal agency, or 
no action.

                             OPEN AT OCTOBER 1, 2007

Two contacts were open at October 1, 2007.  The first is a Misconduct in 
Research case involving a university that allegedly omitted critical 
information from the NEH grant application that may have affected the 
awarding of the grant.  We are working with a professional organization of 
the discipline concerning the allegation.  In addition, we are 
communicating with experts who are familiar with the subject matter.  We 
expect to have this case closed in April 2008.

The other contact involves an NEH challenge grant recipient and was brought 
to our attention by a former employee of the organization.  The allegation 
states that the grant recipient certified ineligible gifts to NEH.  As a 
result of the certification, matching funds in the amount of $400,000 were 
released under the challenge grant.  As of March 31, 2008, we recovered 
more than $283,000.  The grantee has been given three additional weeks to 
provide documentation or return $117,000 to NEH.  This case will be closed 
in April 2008.

CONTACTS DURING THE SIX MONTH PERIOD ENDED MARCH 31, 2008

We received six Hotline contacts during the reporting period.  One 
involved an NEH employee and the other five involved grantees.  The 
internal situation involved an NEH timekeeper who had falsified his/her 
own timesheets over a period of five years.  The NEH Office of Human 
Resources (OHR) discovered the problem.  The amount of the theft was more 
than $35,000.  The OHR obtained all of the documentation and NEH eventually 
terminated the person.  The OIG has presented a case to the Department of 
Justice Criminal Division.  We are waiting for their response if they 
accept or decline the case.

The first grantee matter was brought to our attention by the U.S. General 
Accountability Office Hotline Division and involved alleged improper actions 
of an executive director at a state humanities council.  The OIG is obtaining 
information from the Councils staff and has made contact with several former 
employees.  The former employees have refused to provide information to the 
OIG, and we learned that several have non-disclosure agreements with the 
Council/former executive director.  Our counsel will be preparing subpoenas 
to obtain the documents necessary to complete our investigation.

As is the general practice of the NEH Office of Grant Management, they 
reported to the OIG that final reports were not received from a grantee.  
Eventually, the reports were received and accepted by NEH and we closed 
our file.

The Office of Grant Management and the Division of Preservation and Access 
informed the OIG that board members of a current grantee were resigning 
because the grantee was allegedly wasting funds on building a lavish  hotel.  
Previous to the allegation, the NEH Acting General Counsel informed the OIG 
that the grantee was requesting permission to use funds from a challenge 
grant that ended in 2006 to build the hotel.  We informed NEH to suspend 
the current grant in accordance with Office of Management and Budget 
procedures.  This matter is still pending final disposition.

NEH OIG Semiannual Report               7                      March 2008

* * * * * * * * * * * * * *

                             INVESTIGATIVE ACTIVITIES

We received a telephone Hotline complaint from a former employee of an 
organization that has a current NEH challenge grant.  The anonymous 
complainant alleged that the organization falsified information on the 
grant application.  The OIG reviewed the grant folder and discussed with 
program staff the information that was alleged to be incorrect.  NEH staff 
did not find the information being relevant to the extent that it would 
have prevented the NEH from making the award.  The OIG reviewed the 
grantees website and learned that the NEH challenge grant was not 
disclosed.  Therefore, we will audit the first certification that the 
grantee submits to determine if the gifts are eligible for matching.  Our
exam will begin in the next semiannual reporting period.

The last grantee allegation was brought to our attention by an 
individual/organization that was not awarded a contract from one of the 
state humanities councils.  Our inquiries of the Council staff and of the 
person making the allegations has led us to the preliminary opinion that 
the winning bidder met the criteria of the invitation to bid.  We have 
informed the Council and the complainant of this; however, we have 
requested the Office of Federal State Partnership staff to review the 
information from a program/humanist viewpoint.  We expect to have this 
situation closed in April 2008.

                                OPEN AT MARCH 31, 2008

As discussed above, only one matter was closed during this period with 
several scheduled to be completed by the end of April 2008.  Thus, of the 
two open at the beginning of the period and the six received during the 
period, seven remain open at March 31, 2008.

                MATTERS REFERRED TO PROSECUTIVE AUTHORITIES

We reported one internal matter to the Department of Justice Criminal 
Division.  We are waiting to hear if they will be accepting the case.

                   HOTLINE AND PREVENTION ACTIVITIES

We maintain a local Hotline phone number, an agency e-mail address, and an 
internet address to provide additional confidentiality for those persons 
bringing matters to the attention of the OIG.  We periodically issue 
agency-wide e-mail messages informing NEH staff of violations that are 
reportable to the OIG.  We also send e-mail messages several times during 
the year to inform NEH staff about the OIG operations.  Posters advising 
staff to contact the OIG are displayed throughout the agencys facilities.

                        SUMMARY OF INVESTIGATIVE ACTIVITIES

                   Open at beginning of period              2 

                   Matters brought to the OIG during
                      the reporting period	            6

                   Total investigative contacts	            8

                   Closed, referred, or no action needed
                      during the reporting period	      1

                   Open at end of period	                  7

NEH OIG Semiannual Report               8                      March 2008

* * * * * * * * * * * * * *

                                OTHER ACTIVITIES

                       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 to assess whether proposed legislation and/or regulations (1) 
affect the economy and efficiency of agency programs and operations, and 
(2) contain adequate internal controls to prevent and detect fraud and 
abuse.  During this period, no legislative reviews were required.

                           WORKING WITH THE AGENCY

OIG staff attend various NEH meetings - panel meetings (where grant 
applications are reviewed by outside consultants), pre-council meetings 
(where program staff discuss panel review results with the Chairman and 
his immediate staff), and the National Council meeting.  Also, the IG or 
Deputy IG attends the Chairman's monthly policy group meetings.  The 
Office of Inspector General contributes to the discussions but does not 
participate in policymaking.

The Office of Inspector General participated with the NEH Chairman, other 
NEH program, grant management, and senior staff in the 2007 National 
Humanities Conference sponsored by the Federation of State Humanities 
Councils.  OIG staff conducted a workshop session discussing topics related 
to state humanities councils compliance and audit responsibilities.  State 
council executive directors, fiscal officers, and Board members were in 
attendance.

                   PARTICIPATION ON THE EXECUTIVE COUNCIL ON
                           INTEGRITY AND EFFICIENCY

In 1992, the President established the Executive Council on Integrity and 
Efficiency (ECIE) 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 input to the ECIE.  The 
Inspector General is a member of the Audit Committee of the President's 
Council on Integrity and Efficiency, and participates in the Misconduct in 
Research meetings.  In addition, he is a member of the Grant Fraud Committee, 
a subcommittee of the National Procurement Fraud Task Force.  The Deputy IG 
participates in the Single Audit Round Table and the Federal Audit Executive 
Council (FAEC).  One senior auditor attends the monthly meetings of the 
Financial Statement Audit Network, a subcommittee of the FAEC. 

                         INTRA-GOVERNMENTAL ACTIVITY

Congressional Inquiry

We responded to an inquiry from the Honorable Henry A. Waxman, Chairman of 
the House of Representatives ~ Committee on Oversight and Government 
Reform concerning recommendations made by the OIG from January 1, 2001 to 
the date of the inquiry that have not been implemented by agency officials.

Collaboration with the National Science Foundation ~ Office of Inspector General

OIG staff attended a planning meeting to discuss a prospective joint 
investigative effort concerning a major media grantee.  The joint effort 
would involve IG staff from four (4) Federal agencies.  The investigation 
would be led by the NSF ~ OIG.

NEH OIG Semiannual Report               9                      March 2008

* * * * * * * * * * * * * *

                           OTHER ACTIVITIES (Continued)

The OIG has posted several semiannual reports on the internet and on the 
NEH intranet.  The reports are accessible through the NEH homepage and the 
OIG homepage (http://www.neh.gov/whoweare/OIG.html).  

To advance NEH staff recognition of the OIG mission and responsibilities, 
we provide links to several other Federal agencies such as the Office of 
Management and Budget, the General Accountability Office, the Office of 
Government Ethics, and the IGNET. 

                             TECHNICAL ASSISTANCE

Throughout the reporting period, OIG staff provided telephone technical 
help to NEH grantees and independent public accountants about various 
matters.  Generally, these involve the preparation of indirect cost 
proposals and implementation of the audit requirements of OMB Circular 
A-133.

The Office of Inspector General previously published an Accounting System 
Manual for State Humanities Councils which describes a generic accounting 
system specifically designed for the needs of the state councils.  The 
manual was last revised in September 1999.  During this reporting period, 
OIG staff worked on revisions to the manual to incorporate updated 
information and amend model transactions to conform with generally 
accepted accounting principles.

     ASSISTANCE TO THE INSTITUTE OF MUSEUM AND LIBRARY SERVICES (IMLS)

The National Endowment for the Humanities OIG has an interagency agreement 
to provide investigation assistance to the IMLS.  The NEH OIGs 
responsibilities are limited to an internal review of any allegation, and 
to obtain investigation assistance from another OIG to perform the work.  
The agreement allows the NEH OIG to recover all direct costs and other 
costs that meet the legal requirements of the Economy Act.  During this 
period, IMLS did not request any assistance from the NEH OIG.

NEH OIG Semiannual Report               10                     March 2008

* * * * * * * * * * * * * *

                           PRIOR AUDIT REPORTS UNRESOLVED

o   Several recommendations from prior FISMA and Information Technology 
    Security reviews remain to be addressed.  The staff of the NEH Office 
    of Information Resources Management is currently working on 
    implementing some of the recommendations.

o   A finding disclosed in the Independent Auditors Report on the 
     financial statements for September 30, 2006 concerning separation of 
     incompatible duties has not been completely resolved.  The NEH has 
     made significant progress in separating incompatible duties and has 
     additional plans to refine those controls.

o   An opinion from the Office of the General Counsel (OGC) is required 
    in order to close OIG-06-02 (IA), Audit of the Selection, Purchase and 
    Implementation of the Oracle Accounting System, issued July 19, 2006.  
    It is our understanding that an attorney has been assigned to this 
    matter and we expect an opinion that will close the audit 
    recommendation.

NEH OIG Semiannual Report               11                     March 2008

* * * * * * * * * * * * * *

                                   TABLE I

                           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.

IG Act Reference	 Reporting Requirements					     Page
----------------   ---------------------                               ----

Section 4(a)(2)    Regulatory and Legislative Reviews.................   9

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........   8

Section 5(a)(5)    Instances Where Information Was Refused or 
                      Not Provided....................................   *

Section 5(a)(6)    List of Reports Issued.............................   3

Section 5(a)(7)    Summary of Reports Issued.......................... 4-5 

Section 5(a)(8)    Audit Reports - Questioned Costs...................  13

Section 5(a)(9)    Audit Report - Funds To Be Put to Better Use.......  13 

Section 5(a)(10)   Prior Audit Reports Unresolved.....................  11

Section 5(a)(11)   Significant Revised Management Decisions...........   *

Section 5(a)(12)   Significant Management Decisions with which 
                      OIG Disagreed...................................   *

 *   None this period

NEH OIG Semiannual Report               12                     March 2008

* * * * * * * * * * * * * *

                                    TABLE II
                        INSPECTOR GENERAL-ISSUED REPORTS
                             WITH QUESTIONED COSTS 

                                           Number   Questioned  Unsupported    
                                         Of Reports    Cost        Cost	
                                         --------   -----------  ---------
A.  For which no management decision has 
    been made by the commencement of the 
    reporting period.                      - 1 -      $100,000    $ - 0 - 
B.   Which were issued during the 
     reporting period.                     - 0 -       $  - 0 -   $ - 0 -
                                         --------   ----------- ----------

                 Subtotals (A+B)           - 1 -      $100,000    $ - 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 -

    iii. Dollar value of costs not 
         disallowed based on the Value 
         of Services Received.             - 0 -    $   - 0 -    $  - 0 -

D.  For which no management decision has 
    been made by the end of the reporting 
    period.                                 - 1 -     $100,000    $  - 0 -

E.  Reports for which no management 
    decision was made within six months 
    of issuance.                            - 1 -     $100,000    $  - 0 -

                                    TABLE III
                        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 the reporting period.           - 0 -      $ - 0 -

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 management.                                 $ - 0 -
      ii. Dollar value of recommendations that were 
          not agreed to by management.                             $ - 0 -

D.  For which no management decision was made by the 
    end of the reporting period.                        - 0 -      $ - 0 -

NEH OIG Semiannual Report               13                     March 2008

* * * * * * * * * * * * * *

                          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               14                     March 2008

* * * * * * * * * * * * * *