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93–882PDF 2015

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 
(II) 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. LAMAR S. SMITH, Texas, Chair 

FRANK D. LUCAS, Oklahoma 

F. JAMES SENSENBRENNER, JR. 

DANA ROHRABACHER, California 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL 

STEVEN M. PALAZZO, Mississippi 

MO BROOKS, Alabama 

RANDY HULTGREN, Illinois 

BILL POSEY, Florida 

THOMAS MASSIE, Kentucky 

JIM BRIDENSTINE, Oklahoma 

RANDY K. WEBER, Texas 

BILL JOHNSON, Ohio 

JOHN R. MOOLENAAR, Michigan 

STEVE KNIGHT, California 

BRIAN BABIN, Texas 

BRUCE WESTERMAN, Arkansas 

BARBARA COMSTOCK, Virginia 

DAN NEWHOUSE, Washington 

GARY PALMER, Alabama 

BARRY LOUDERMILK, Georgia 

EDDIE BERNICE JOHNSON, Texas 

ZOE LOFGREN, California 

DANIEL LIPINSKI, Illinois 

DONNA F. EDWARDS, Maryland 

SUZANNE BONAMICI, Oregon 

ERIC SWALWELL, California 

ALAN GRAYSON, Florida 

AMI BERA, California 

ELIZABETH H. ESTY, Connecticut 

MARC A. VEASEY, TEXAS 

KATHERINE M. CLARK, Massachusetts 

DON S. BEYER, JR., Virginia 

ED PERLMUTTER, Colorado 

PAUL TONKO, New York 

MARK TAKANO, California 

BILL FOSTER, Illinois 

SUBCOMMITTEE ON OVERSIGHT

HON. BARRY LOUDERMILK, Georgia, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

BILL POSEY, Florida 

THOMAS MASSIE, Kentucky 

JIM BRIDENSTINE, Oklahoma 

BILL JOHNSON, Ohio 

LAMAR S. SMITH, Texas 

DON BEYER, Virginia 

ALAN GRAYSON, Florida 

ZOE LOFGREN, California 

EDDIE BERNICE JOHNSON, Texas 

SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY

HON. BARBARA COMSTOCK, Virginia, Chair 

FRANK LUCAS, Oklahoma 

MICHAEL T. MCCAUL, Texas 

STEVEN M. PALAZZO, Mississippi 

RANDY HULTGREN, Illinois 

JOHN MOOLENAAR, Michigan 

STEVE KNIGHT, California 

BRUCE WESTERMAN, Arkansas 

GARY PALMER, Alabama 

LAMAR S. SMITH, Texas 

DANIEL LIPINSKI, Illinois 

ELIZABETH ESTY, Connecticut 

KATHERINE CLARK, Massachusetts 

PAUL TONKO, New York 

SUZANNE BONAMICI, Oregon 

ERIC SWALWELL, California 

EDDIE BERNICE JOHNSON, Texas 
(III) 

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 

(1) 

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. 
2 
3 
4 
5 
6 
7 
8 

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 
9 

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 
10 

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 
11 

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:] 
12 

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. 
13 

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 
14 

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. 
15 

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. 
16 

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. 
17 

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:] 
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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 
28 

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:] 
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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 
34 

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:] 
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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. 
48 

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 
49 

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 to-
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wards 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 
51 

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, fixedprice 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 wheth- er $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 
52 

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 nongovernment 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. 
53 

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, nonbusiness 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 
54 

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. 
55 

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 
56 

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 pin ́ ata. 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 
57 

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. 
58 

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? 
59 

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. 
60 

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? 
61 

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.] 

(63) 

Appendix I 

ANSWERS TO POST-HEARING QUESTIONS
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ANSWERS TO POST-HEARING QUESTIONS

Responses by Dr. Richard Buckius 
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Appendix II 

ADDITIONAL MATERIAL FOR THE RECORD
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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. 
123 

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. 
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SUBMITTED BY SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY

CHAIRWOMAN BARBARA COMSTOCK
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SUBMITTED BY SUBCOMMITTEE ON OVERSIGHT

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Æ