APRIL 30, 2012

AUDIT REPORT

REPORT NO. IG-12-011 (ASSIGNMENT NO. A-11-013-00)

OFFICE OF AUDITS

NASA’S USE OF RESEARCH ANNOUNCEMENT AWARDS 

FOR AERONAUTICS RESEARCH

OFFICE OF INSPECTOR GENERAL

National Aeronautics and 

Space Administration

 
REPORT NO. IG-12-011 

Final report released by:

Paul K. Martin

Inspector General

Acronyms 

ARMD Aeronautics Research Mission Directorate

FAR Federal Acquisition Regulation 

NRA NASA Research Announcement

OMB Office of Management and Budget
APRIL 30, 2012

REPORT NO. IG-12-011 

OVERVIEW

NASA’S USE OF 

RESEARCH ANNOUNCEMENT AWARDS FOR 

AERONAUTICS RESEARCH

The Issue

NASA’s three Mission Directorates – Science, Human Exploration and Operations, and 

Aeronautics Research – support their research, development, and education efforts by 

awarding contracts, grants, and cooperative agreements through NASA Research 

Announcements (NRAs).1

 NASA’s Federal Acquisition Regulation (FAR) Supplement 

defines an NRA as a solicitation for proposals that announces research interests in 

support of NASA programs and provides a formal mechanism for offerors to submit 

competitive research ideas.2

The Aeronautics Research Mission Directorate (ARMD) performs research to increase 

the capacity, efficiency, and flexibility of our national airspace and to address 

aeronautical noise, emissions, performance, and safety challenges. From May 2006 

through January 2011, ARMD funded 447 NRA awards valued at $434.7 million –

approximately one-third of the amount spent by NASA on NRA awards – to advance the 

Mission Directorate’s aeronautics research and development goals.

 NASA has used NRA awards to support human and robotic 

space missions, space observation and studies of the Earth and its climate, aeronautics 

research, and education and public outreach. From 2006 to 2010, NASA spent 

approximately $1.3 billion on NRA awards across all its Mission Directorates.

3

 

1 FAR Subpart 2.1 defines a contract as a mutually binding legal relationship that obligates the seller to 

furnish goods or services and the Government to pay for them. According to NASA’s Grants and 

Cooperative Agreement Handbook, a grant is used to accomplish a NASA objective through stimulating 

or supporting the acquisition of knowledge or attempting to determine the potential of scientific 

discoveries or improvements in technology, materials, processes, methods, devices, or techniques and 

advance the state of the art. According to 31 USC 6101, grants are distinguished from contracts in that 

grants provide financial assistance to the recipient to conduct a fairly autonomous program; contracts 

involve acquisition. A cooperative agreement is used when (1) the principal purpose is the transfer of 

anything of value to the recipient to accomplish an activity that has a public purpose and (2) NASA 

anticipates substantial involvement between the Agency and the recipient during performance of the 

activity. Grants are distinguished from cooperative agreements in that substantial involvement is not 

expected between NASA and the recipient when carrying out the activity. 

 Approximately 

$34.4 million was funded by the American Recovery and Reinvestment Act of 2009 

2 NASA FAR Supplement 1835.016-71, “NASA Research Announcements.” An NRA differs from a

Request for Proposals, which contains a statement of work or specification to which the proposer 

responds. 

3 For comparison, the Science Mission Directorate annually makes over 1,000 NRA awards, primarily in 

the form of grants, totaling approximately $200 million per year (less than 5 percent of the Directorate’s 

annual budget). 
OVERVIEW

ii REPORT NO. IG-12-011 

(Recovery Act). For future years, ARMD plans an annual funding level of $75 million 

for NRA awards.

NASA FAR Supplement 1835.016-71, “NASA Research Announcements,” defines an 

NRA as a solicitation that announces research interests in support of NASA’s programs 

and provides a formal mechanism for corporations, universities, and research institutions

to submit competitive project ideas. For example, a 2007 NRA solicitation funded 

research for simulation and testing of weather concepts that NASA will use in developing 

the Next Generation Air Transportation system. Another award under a 2006 solicitation 

funded research to develop concepts and computer code for the organization of airspace 

and changing airspace configurations for Next Generation Air Transportation system 

operations. NRA awards are typically for a 3-year period, but can be shorter or longer as 

needed.

We initiated this audit to examine whether the research funded by NRA awards, 

including awards funded by the Recovery Act, advanced NASA’s aeronautics research 

goals and whether award costs were allowable and properly supported. 

We reviewed documents from awards made by Ames Research Center, Dryden Flight 

Research Center, Glenn Research Center, Langley Research Center, and the NASA 

Shared Services Center. We selected a random sample of 43 awards between May 2006 

and January 2011, including 7 Recovery Act–funded awards, with a total value of 

$50.9 million. We assessed 18 of these awards, including 4 funded by the Recovery Act, 

to determine whether technical results advanced NASA’s aeronautics research, and we 

reviewed all 43 for cost allowability and support. Details of the audit’s scope and 

methodology are in Appendix A.

Results

We found that NASA’s aeronautics-related NRA awards, including awards funded by the 

Recovery Act, advanced the aeronautics research goals established by NASA. 

Specifically, the awards aligned with one or more goals set forth in ARMD project plans 

and, according to NASA technical experts, expanded the knowledge needed to advance 

those goals. However, we found that 18 of the 43 awards we reviewed (42 percent) 

contained approximately $2.4 million in questioned costs: $22,114 in unallowable fees 

and $2,405,635 in unsupported costs.4

 Based on our sample results, we estimate that 

ARMD’s 447 NRA awards during this 5-year period contained $25.2 million in 

unallowable or unsupported costs. Moreover, we project that by addressing the 

deficiencies we identified NASA could avoid awarding approximately $3.6 million in 

unallowable and/or unsupported costs annually in ARMD NRA awards.

5

 

4 None of the 18 awards with questioned costs were funded by the Recovery Act. 

5 See Appendix C for details of our calculations for questioned costs and funds put to better use.
OVERVIEW

REPORT NO. IG-12-011 iii

NRAs Advanced ARMD’s Research Goals. We found that NRA awards advanced 

NASA’s aeronautics research goals. Specifically, the awards we reviewed aligned with 

ARMD project goals within the Airspace System Program, Aviation Safety Program, 

Fundamental Aeronautics Program, and Integrated Systems Research Program. We 

considered an award to have advanced aeronautics research goals if it aligned with 

research goals contained in ARMD project plans and produced results in which 

(1) NASA received the product agreed to in the procurement instrument and (2) NASA 

officials stated that the product expanded the knowledge needed to advance research 

goals in ARMD project plans. 

We reviewed proposals for 18 awards, including 4 funded by the Recovery Act, and 

found that the proposals aligned with one or more research goals described in NASA 

project plans.6

In addition, we found that each of the awards reviewed produced products such as written 

progress and final technical reports, software, hardware, and conference papers that 

ARMD officials said will advance the Mission Directorate’s research goals. According 

to program officials, NRA awards have led to the development of sensors, computer 

codes and models, prototypes, and other products, including the following: 

 For example, ARMD’s Integrated Systems Research Program selected for 

award a proposal that will explore and mature unconventional aircraft designs with the 

potential to meet mid-term goals (5–10 years) for acceptable noise levels, fuel 

consumption, and nitrogen oxides emissions. This award aligned directly with the 

Mission Directorate’s goal to reduce noise levels and harmful emissions over the next 

20 years. 

• A heat flux sensor and calibration technique that collects data on heat changes 

during high-temperature tests of advanced composite structures and thermal 

protection system panels. NASA officials said the Agency has successfully used 

two of these sensors to test body sections of a hypersonic vehicle.7

• Computer code for predicting airflow over aircraft structures that NASA used on 

a Space Shuttle flight in March 2009. 

 

• A prototype tool that directly supports research analyzing safety cases to verify 

and validate systems that will be used in the Next Generation Air Traffic 

Management System. 

Based on the findings for these 18 awards, we concluded that no further review of 

additional awards for alignment with project plans and goals was warranted. 

NRA Awards Contained Unallowable and Unsupported Costs. We found that 18 of 

the 43 awards we reviewed (42 percent) included costs that were not allowable or were 

 

6 We took our sample for this aspect of the audit from our initial random sample of 43 awards. 

7 A hypersonic vehicle is capable of reaching speeds greater than five times the speed of sound.
OVERVIEW

iv REPORT NO. IG-12-011 

not adequately supported (see Appendix B for a breakdown by award recipient of the 

costs we questioned).8

In our review of 43 awards, we identified the following unallowable or unsupported 

costs: 

 Allowable costs are costs that meet criteria for inclusion in the 

contract, grant, or cooperative agreement and are reasonable in amount. For a cost to be 

adequately supported, NASA must obtain and document sufficient supporting 

information to determine that the cost is allowable, reasonable, and complies with the 

terms of the contract. 

• Unallowable Fees. NASA awarded unallowable fees totaling $22,114 on 2 of the 

43 (5 percent) NRA awards we reviewed. In one case, The Pennsylvania State 

University (Penn State) proposed a $12,590 fee that is expressly forbidden by the 

NASA FAR Supplement. In the procurement file documentation, the contracting 

officer acknowledged the prohibition on paying fees to universities, but justified 

the fee in this case on the ground that the proposal came from Penn State’s 

Applied Research Laboratory rather than Penn State itself. The contracting 

officer asserted that the Laboratory is “functionally an independent arm of [Penn 

State] and, therefore, not subject to the FAR Supplement prohibition.” However, 

because NASA awarded the contract to Penn State and not the Laboratory, and 

because, as the contracting officer acknowledged in the Price Negotiation 

Memorandum, the Laboratory’s “financial and legal identity are inextricably 

woven to [Penn State], we question the allowability of the fee. 

• Unsupported Tuition Costs. NASA awarded $589,895 on 12 of the 43 

(28 percent) NRA awards in our sample without obtaining sufficient supporting 

information to determine whether proposed tuition costs were allowable. Tuition 

costs are allowable only if they meet specific requirements of Office of 

Management and Budget (OMB) Circular A-21, “Cost Principles for Educational 

Institutions,” 2004, including whether “the costs proposed are reasonable for the 

work performed.”9

 

8 Of the 43 awards, 7 were Recovery Act–funded; of those 7, none contained questioned costs.

 The procurement files for these 12 awards contained no 

evidence that NASA procurement officials had assessed proposed tuition costs for 

reasonableness and compliance with the other requirements of OMB Circular A21. For example, we found that NASA awarded Georgia Tech Research 

Corporation $26,208 to fund 100 percent of the tuition costs for two graduate 

students. However, the Corporation’s budget proposal did not identify the 

students’ degree programs or provide support for the amount of tuition proposed. 

Indeed, the technical proposal stated that the students would provide only 

9 OMB Circular A-21, Section J.45, “Scholarships and student aid costs,” states that tuition costs are 

allowable provided that (1) the individual is conducting activities necessary to support the agreement; 

(2) tuition costs and support are in accordance with the institution’s policies; (3) the student is enrolled in 

a degree program and the program is related to the Federally sponsored research project; (4) the costs 

proposed are reasonable for the work performed; and (5) the institution similarly compensates students in 

other activities.
OVERVIEW

REPORT NO. IG-12-011 v 

one-third of their time and effort to the NASA-sponsored agreement. Despite this 

clear statement, there is no evidence that NASA procurement personnel 

considered whether this ratio was consistent with the educational institution’s 

policy, whether the institution similarly compensated students for other activities, 

or whether the proposed cost was otherwise reasonable for the work that the 

students were expected to perform. 

• Other Unsupported Costs. NASA awarded $1,815,740 on 6 of the 43 

(14 percent) NRA awards in our sample without obtaining sufficient supporting 

information to determine that these costs were fair and reasonable. NASA policy 

establishes requirements for adequately documenting proposed costs, including a 

requirement for documentation of itemized budgets for all subcontracts.10

We found that the NRA awards we examined contained unallowable and unsupported 

costs because procurement officials did not perform adequate due diligence in reviewing 

costs proposed by NRA awardees. Furthermore, NASA’s “Guidebook for Proposers 

Responding to a NASA Research Announcement (NRA) or Cooperative Agreement 

Notice (CAN),” January 2012, does not adequately address the documentation proposers 

should submit to support proposed tuition costs.

 In 

2007 NASA awarded a contract valued at $1,283,077 to a university, $962,753 

(75 percent) of which was for subcontract costs. However, the university did not 

provide, and NASA procurement officials did not request, itemized budgets 

detailing how the subcontract funds would be spent. Absent itemized budgets, 

procurement officials did not have a basis for assessing the reasonableness of 

proposed subcontract costs. 

Based on our statistical projections, we estimate that NASA awarded aeronautics-related 

NRA contracts and cooperative agreements that contained $25.2 million in unallowable 

and unsupported costs from May 2006 through January 2011. For future years, we 

estimate that by addressing the type of deficiencies we identified NASA could avoid 

awarding approximately $3.6 million of unallowable and/or unsupported costs annually 

in ARMD NRA awards. 

Management Action

In an effort to ensure that all costs in NRA awards are allowable and properly supported, 

we recommended that the Assistant Administrator for Procurement provide additional 

training to NASA procurement personnel regarding the prohibition on fees to educational 

institutions and the requirement for documenting cost elements such as subcontracts and 

tuition for students. We also recommended that the Assistant Administrator revise the 

 

10 The NASA policy requiring itemized budgets for subcontracts is found in the January 2006 edition of the 

Agency’s “Guidebook for Proposers Responding to a NASA Research Announcement (NRA),” section 

2.3.11(a), “Description of Required Budget Justification and Details.”
OVERVIEW

vi REPORT NO. IG-12-011 

Guidebook for NRA Proposers to make clear the documentation required to support 

proposed student tuition costs. 

In response to a draft of this report, the Assistant Administrator for Procurement partially 

concurred with our recommendations, stating that he agrees with our findings regarding

the lack of adequate documentation to support the analysis of award proposals and 

believes our review of the pre-award process will help NASA improve its internal 

controls. However, he took exception with some of the analysis and conclusions that led 

to our recommendations. Specifically, the Assistant Administrator stated that inadequate 

documentation and analysis of costs during the pre-award stage does not necessarily 

mean that NASA actually paid unallowable costs. Additionally, the Assistant 

Administrator stated that we mischaracterized NASA’s handling of the fee proposed by 

Penn State, pointing out that the contracting officer refused to make an award that 

included the fee and that the proposal was subsequently revised. He also asserted that

extrapolating the questioned costs in the finding – in particular the Penn State fee – over 

the broader universe of NRA awards is unsupported. 

Our report makes no judgment on whether NASA actually paid unallowable or 

unsupported costs. Rather, we based our recommendations on the finding that 

procurement officials did not make sufficient efforts – prior to making an award – to 

obtain the support necessary to determine whether proposed costs were reasonable. As 

such, we based our monetary projections solely on the questioned costs found in our 

sample and extrapolated the results to illustrate the potential impact associated with 

procurement officials failing to conduct adequate pre-award analysis. Regarding the 

Penn State fee, we maintain that NASA awarded the contract without adequate support 

for the proposed cost elements. Specifically, the revised proposal increased labor (and 

associated fringe benefit costs) and travel costs by an amount equivalent to the 

unallowable fee, thereby retaining a total contract price of $200,000, and did not include 

an expanded scope of work justifying the increased labor and travel costs. Moreover, the 

$9,524 Penn State fee in question represents only 0.4 percent of the $2.4 million of 

questioned costs in our sample (see discussion on page 8). 

With regard to the specific recommendations, the Assistant Administrator stated that his 

office has developed and scheduled two training courses for cost and price analysis and 

will review and revise the annual Guidebook for NRA Proposers as needed to ensure that 

proposers provide the necessary documentation for procurement officials to determine the 

reasonableness of tuition costs. We find the Assistant Administrator’s proposed actions 

responsive to the intent of our recommendations and therefore we will close the 

recommendations upon completion and verification of the proposed actions. 

Management’s complete comments are reprinted in Appendix D. 

 
APRIL 30, 2012

REPORT NO. IG-12-011 

CONTENTS

INTRODUCTION

Background _________________________________________ 1 

Objectives __________________________________________ 3 

RESULTS

NRA Awards Advanced ARMD’s Research Goals______________ 4 

NRA Awards Contained Unallowable and Unsupported Costs____ 6 

APPENDIX A 

Scope and Methodology_______________________________ 13

Review of Internal Controls ____________________________ 14

Prior Coverage ______________________________________ 15

APPENDIX B 

Review of Award Costs________________________________ 16

APPENDIX C 

Sampling Methodology and Projection of Results ___________ 19

APPENDIX D 

Management Comments ______________________________ 21

APPENDIX E 

Report Distribution___________________________________ 24

APRIL 30, 2012

REPORT NO. IG-12-011 1 

INTRODUCTION

Background

NASA’s three Mission Directorates – Science, Human Exploration and Operations, and 

Aeronautics Research – support their research, development, and education efforts by 

awarding contracts, grants, and cooperative agreements through NASA Research 

Announcements (NRAs).11 NASA’s Federal Acquisition Regulation (FAR) Supplement 

defines an NRA as a solicitation for proposals that announces research interests in 

support of NASA programs and provides a formal mechanism for offerors to submit 

competitive research ideas.12

The Aeronautics Research Mission Directorate (ARMD) performs research to increase 

the capacity, efficiency, and flexibility of our national airspace and to address noise, 

emissions, efficiency, performance, and safety challenges. For the past 5 years, the 

ARMD Airspace Systems Program, Aviation Safety Program, Fundamental Aeronautics 

Program, and Integrated Systems Research Program have used NRA awards to 

(1) generate advanced research ideas that further NASA’s goals and objectives; 

(2) stimulate close collaboration among NASA researchers and NRA award recipients; 

and (3) supplement and enhance ARMD’s in-house capabilities. 

 NASA has used NRAs to support efforts in human and 

robotic space missions, space observation and studies of the Earth and its climate, 

aeronautics research, and education and public outreach. From 2006 to 2010, NASA 

spent approximately $1.3 billion on NRA awards by all its Mission Directorates. 

In 2006, the National Research Council reported that without input from academia and 

industry, NASA’s aeronautics research might suffer from a lack of specialized technical 

expertise, facilities, and capabilities.13

 

11 A contract is a mutually binding legal relationship that obligates the seller to furnish goods or services 

and the Government to pay for them. A grant is used to accomplish a NASA objective through 

stimulating or supporting the acquisition of knowledge or attempting to determine the potential of 

scientific discoveries or improvements in technology, materials, processes, methods, devices, or 

techniques and advance the state of the art. Grants are distinguished from contracts in that grants provide 

financial assistance to the recipient to conduct a fairly autonomous program; contracts involve 

acquisition. A cooperative agreement is used when (1) the principal purpose is the transfer of anything 

of value to the recipient to accomplish an activity that has a public purpose and (2) NASA anticipates 

substantial involvement between the Agency and the recipient during performance of the activity. Grants 

are distinguished from cooperative agreements in that substantial involvement is not expected between 

NASA and the recipient when carrying out the activity. 

 Accordingly, the Council recommended that 

NASA establish a more balanced allocation of funding between in-house and external 

organizations. 

12 NASA FAR Supplement 1835.016-71, “NASA Research Announcements.” An NRA differs from a

Request for Proposals, which contains a statement of work or specification to which the proposer 

responds. 

13 National Research Council, “Decadal Survey of Civil Aeronautics: Foundation for the Future,” 2006.
INTRODUCTION

2 REPORT NO. IG-12-011 

In line with the Council’s recommendation, ARMD senior officials restructured ARMD’s 

programs and projects to focus on long-term, cutting-edge research. Consistent with this 

new focus, research would pursue lower technology readiness levels that generally do not 

involve the production of a prototype or include flight-testing.14

From May 2006 through January 2011, ARMD funded 447 awards valued at 

$434.7 million – approximately 33 percent of the $1.3 billion that NASA spent on NRA 

awards – to advance the Mission Directorate’s aeronautics research and development 

goals. Approximately $34.4 million of the $434.7 million was funded by the American 

Recovery and Reinvestment Act of 2009 (Recovery Act).

 In addition, ARMD 

committed to spending at least $50 million annually on contracts and cooperative 

agreements competitively selected through NRAs. ARMD issued its initial NRA 

solicitation in May 2006. 

15

NRA Process within ARMD

 For future years, ARMD 

plans an annual NRA funding level of $75 million.

ARMD administers NRA awards through a four-stage process: solicitation, evaluation 

and selection, award, and post-award administration. We describe each of these stages 

below: 

• Solicitation: ARMD issues the NRA solicitation, which includes guidance 

regarding requirements and cost evaluation criteria for that program year. 

Generally, proposals are required to include a description of the offeror’s research 

idea and technical approach, identification of principal researchers, and a 

proposed budget. 

• Evaluation and Selection: ARMD competitively evaluates proposals through a 

peer review process involving a panel of at least three reviewers with technical 

expertise in the area of the proposal. The evaluation considers the proposal’s 

overall scientific or technical merit, its innovative approaches, the proposer’s 

capabilities, and the capabilities of key personnel involved in the proposed 

research. Based on the panel’s evaluations, a NASA official selects proposals for 

award. 

• Award: Based on the nature of the research, the contracting officer chooses the 

appropriate procurement instrument (contract or cooperative agreement), 

negotiates with the proposer, and finalizes the award. Agency policy permits the 

use of grants, but ARMD awarded only contracts and cooperative agreements for 

 

14 Technology readiness level is a scale that measures the maturity of a technology ranging from 1 (basic 

technology research) to 9 (systems test, launch, and operations). 

15 The Act stipulates that Recovery Act funds are to be used for technological advances in science and 

requires a significant level of transparency and accountability to ensure that funds are expended 

appropriately and to make information about expenditures readily available to the public.
INTRODUCTION

REPORT NO. IG-12-011 3 

Phase 1 

• NASA 

Headquarters 

releases NRA 

solicitiation, 

describing topics of 

interest to the 

Agency.

• ARMD issues 

applicable 

guidance.

Phase 2

• Proposals are 

competitively 

evaluated through 

a peer review.

•NASA selecting 

official uses those 

evalautions to 

select proposals 

for award.

Phase 3

• The contracting 

officer chooses the 

appropriate award 

instrument and 

negotiates with 

the proposer (type 

of contract, cost, 

and delivery 

schedule). 

• The contracting 

officer awards the 

instrument.

Phase 4

• The contracting 

officer processes 

payments.

• The contracting 

and technical 

officers review 

performance.

proposals selected through NRA solicitations during the period of our review. 

Awards are typically for a 3-year period of performance, but may be shorter or 

longer as needed.

• Post-Award Administration: During this period, NASA contracting and 

technical officers monitor recipient performance and process payments. 

The following chart illustrates the NRA process.

Objectives

Our overall audit objective was to examine whether ARMD-funded NRAs advanced 

NASA’s aeronautics research goals and whether associated costs were allowable and 

properly supported. See Appendix A for details of the audit’s scope and methodology, 

our review of internal controls, and a list of prior coverage. See Appendix B for details 

about our sample and Appendix C for details about our sampling methodology and 

projection of results. 
RESULTS

4 REPORT NO. IG-12-011 

NRA AWARDS ADVANCED ARMD’S 

RESEARCH GOALS

We found that NRA awards advanced NASA’s aeronautics research goals. 

Specifically, the awards we reviewed aligned with ARMD project goals within the 

Airspace System Program, Aviation Safety Program, Fundamental Aeronautics 

Program, and Integrated Systems Research Program. We considered an award to 

have advanced aeronautics research goals if it aligned with research goals contained 

in ARMD project plans and produced results in which (1) NASA received the 

product agreed to in the procurement instrument and (2) NASA officials stated that 

the product expanded the knowledge needed to advance research goals in ARMD 

project plans. 

Evaluation of NRA Awards Relative to ARMD Project Plans

We selected 18 awards for review, including 4 funded by the Recovery Act.16

In addition, we found that each of the awards reviewed produced products such as written 

progress and final technical reports, software, hardware, and conference papers that 

ARMD officials said will advance the Mission Directorate’s research goals. According 

to program officials, NRA awards have led to the development of sensors, computer 

codes and models, prototypes, and other products, including the following: 

 We found 

that the proposals for all 18 awards aligned with one or more research goals described in 

NASA project plans. For example, ARMD’s Integrated Systems Research Program 

selected for award a proposal that will mature unconventional aircraft designs with the 

potential to meet mid-term goals (5–10 years) for acceptable noise levels, fuel 

consumption, and nitrogen oxides emissions. The project also proposed to develop a 

conceptual design for a subscale vehicle for flight tests. This award aligned directly with 

the Mission Directorate’s goal to reduce noise levels and harmful emissions over the next 

20 years. Similarly, one of the Recovery Act awards aligned with another goal to reduce 

some nitrogen oxides emissions by at least 75 percent below the current standard while 

simultaneously decreasing the amount of fuel an aircraft uses by 40 percent. 

• A heat flux sensor and calibration technique that collects data on heat changes 

during high-temperature tests of advanced composite structures and thermal 

protection system panels. NASA officials stated that the Agency has successfully 

used two of these sensors to test body sections of a hypersonic vehicle.17

 

16 We took our sample for this aspect of the audit from our initial random sample of 43 awards. 

 

17 A hypersonic vehicle is capable of reaching speeds greater than five times the speed of sound.
RESULTS

REPORT NO. IG-12-011 5 

• Computer code for predicting airflow over aircraft structures that NASA used on 

a Space Shuttle flight in March 2009. 

• Computer code to predict engine performance in an effort to achieve significant 

reductions in aircraft fuel consumption and noise. 

• A prototype that, according to NASA technical personnel, shows potential for 

automating aspects of hazard analysis and contributes to the research goal of 

developing improved methods for articulating and implementing safety 

requirements. 

• A prototype tool that directly supports research analyzing safety cases to verify 

and validate systems that will be used in the Next Generation Air Traffic 

Management System. 

Based on our findings for these 18 awards, we concluded that no further review of 

additional awards for alignment with project plans and goals was warranted. 
RESULTS

6 REPORT NO. IG-12-011 

NRA AWARDS CONTAINED UNALLOWABLE AND 

UNSUPPORTED COSTS 

Our review of a sample of NRA awards found 18 of 43 contained unallowable fees 

or unsupported tuition, subcontract, or equipment costs totaling approximately 

$2.4 million. Based on our sample results, we estimate that NASA awarded 

$25.2 million in unallowable or unsupported costs to NRA recipients from inception 

of ARMD’s NRA program in May 2006 through January 2011. This occurred 

because proposals did not contain the documentation required for procurement 

officials to determine whether proposed tuition costs were allowable and 

procurement officials did not perform adequate due diligence when reviewing 

proposed costs. By implementing the recommendations identified in this report, the 

Agency can avoid awarding unallowable and unsupported costs in ARMD NRA 

awards of approximately $3.6 million annually. 

Federal and NASA Requirements for the Allowability of Costs

FAR Requirements for Contracts. FAR 31.201-2, “Determining allowability,” 

provides that a cost is allowable only when it is reasonable, allocable, and conforms to 

generally accepted accounting principles and practices appropriate to the circumstances, 

the terms of the contract, and any limitations set forth in FAR Subpart 31.2.18

FAR 1.602, “Contracting officers,” provides that “no contract shall be entered into unless 

the contracting officer ensures that all requirements of law, executive orders, regulations, 

and all other applicable procedures . . . have been met.” To ensure compliance with 

acquisition regulations, contracting officers must review proposed costs for allowability. 

 A cost is 

reasonable if it does not exceed the amount that a prudent person would pay under similar 

circumstances in the conduct of competitive business and is allocable if it provides 

benefits or bears an equitable relationship to the award. 

Office of Management and Budget (OMB) Requirements for Grants, Contracts, and 

Other Agreements with Educational Institutions. OMB Circular A-21, “Cost 

Principles for Educational Institutions,” 2004, provides “principles for determining the 

costs applicable to research and development, training, and other sponsored work 

performed by colleges and universities under grants, contracts, and other agreements with 

the Federal Government. These agreements are referred to as sponsored agreements.”19

 

18 FAR 31.201-4, “Determining allocability,” states that a “cost is allocable if it is assignable or chargeable 

to one or more cost objectives on the basis of relative benefits received or other equitable relationship.”

19 A sponsored agreement is any grant, contract, or other agreement between the institution and the Federal 

government. 
RESULTS

REPORT NO. IG-12-011 7 

Furthermore, Section J.45, “Scholarships and student aid costs,” states that 

a. Costs of scholarships, fellowships, and other programs of student aid are allowable 

only when the purpose of the sponsored agreement is to provide training to selected 

participants and the charge is approved by the sponsoring agency. However, tuition 

remission and other forms of compensation paid as, or in lieu of, wages to students 

performing necessary work are allowable provided that --

(1) The individual is conducting activities necessary to the sponsored agreement;

(2) Tuition remission and other support are provided in accordance with 

established educational institutional policy and consistently provided in a like manner 

to students in return for similar activities conducted in nonsponsored as well as 

sponsored activities; and

(3) During the academic period, the student is enrolled in an advanced degree 

program at the institution or affiliated institution and the activities of the student in 

relation to the Federally-sponsored research project are related to the degree program;

(4) the tuition or other payments are reasonable compensation for the work 

performed and are conditioned explicitly upon the performance of necessary work; 

and

(5) it is the institution’s practice to similarly compensate students in 

nonsponsored as well as sponsored activities.

b. Charges for tuition remission and other forms of compensation paid to students as, 

or in lieu of, salaries and wages shall be subject to the reporting requirements 

stipulated in Section J.10, and shall be treated as direct or F&A [facilities and 

administrative] cost in accordance with the actual work being performed. Tuition 

remission may be charged on an average rate basis.

NASA Requirements for all NRA Awards. NASA’s annual “Guidebook for Proposers 

Responding to A NASA Research Announcement (NRA) or Cooperative Agreement 

Notice (CAN),” (Guidebook for NRA Proposers) establishes specific Agency policies 

regarding the allowability of individual cost elements included in an NRA budget 

proposal.20

NRA Awards Contained Unallowable and Unsupported Costs

 The Guidebook also establishes documentation requirements for adequately 

supporting proposed cost elements. 

We found that approximately 42 percent of the NRA awards we reviewed (18 of 43) 

contained unallowable or unsupported costs, or both (see Appendix B for a breakdown by 

award recipient of the costs we questioned).

21

 

20 The January 2012 edition is located at 

 

http://www.hq.nasa.gov/office/procurement/nraguidebook/proposer2012.pdf (accessed April 27, 2012).

21 We found no unallowable or unsupported costs in the Recovery Act-funded awards we reviewed. 
RESULTS

8 REPORT NO. IG-12-011 

Specifically, our review identified: 

• unallowable fees ($22,114); 

• unsupported tuition costs ($589,895); and 

• other unsupported costs ($1,815,740). 

Unallowable Fees. In 2010, NASA awarded a $414,380 contract to Pennsylvania State 

University for work titled “High Fidelity CFD Analysis and Validation of Rotorcraft 

Gear Box Aerodynamics,” which included an unallowable fee of $12,590. In the Price 

Negotiation Memorandum, the contracting officer acknowledged the prohibition on 

paying such fees, but justified the fee in this case on the grounds that Penn State’s 

Applied Research Laboratory, as opposed to Penn State, had submitted the technical 

proposal.22

We believe the contracting officer’s rationale for allowing the fee is invalid for two 

reasons. First, NASA awarded the contract to Penn State, not the Laboratory. Second, as 

the contracting officer acknowledged in the Price Negotiation Memorandum, the 

Laboratory’s “financial and legal identity are inextricably woven to [Penn State].” 

Accordingly, we do not believe the Laboratory can properly be viewed as an independent 

entity. 

 The contracting officer asserted that the Laboratory is “functionally an 

independent arm of [Penn State] and, therefore, not subject to the FAR Supplement 

prohibition.” 

In another case, in 2008 NASA awarded a $200,000 contract to Penn State for work 

titled, “Rotorcraft Transmission Noise Path Model, Including Distributed Fluid Film 

Bearing Impedance Modeling.” The contract file contains correspondence showing that 

procurement officials determined that Penn State’s initial budget proposal included an 

unallowable fee of $9,524. However, rather than eliminating the fee and offering to pay 

Penn State $190,476 for the work, a NASA procurement official sent the following 

e-mail: 

If the fee you’ve proposed is really an overhead item, please provide us with a revised 

cost [budget] proposal that identifies it as overhead and we can proceed. We share 

your desire to get this effort awarded as soon as possible.

In response to this e-mail, Penn State submitted a revised budget proposal that eliminated 

the fee but increased labor (and associated fringe benefit costs) and travel costs by an 

equivalent amount, thereby retaining a total contract price of $200,000. However, the 

revised proposal did not include an expanded scope of work justifying the increased labor 

and travel costs, and NASA awarded the contract without further review of the proposed 

 

22 A Price Negotiation Memorandum is a required document in NASA procurement files. The NASA FAR 

Supplement states that the memorandum “serves as a detailed summary of: the technical, business, 

contractual, pricing (including price reasonableness), and other elements of the contract negotiated; and 

the methodology and rationale used in arriving at the final negotiated agreement.” 
RESULTS

REPORT NO. IG-12-011 9 

cost elements. Accordingly, it appears to us that Penn State reclassified the unallowable 

fee as labor and travel costs and that NASA accepted this reclassification without 

additional inquiry or a sufficient basis. NASA procurement officials acknowledged to us 

that the approaching end of the fiscal year and the need to obligate funds was a factor in 

their desire to award the contract expeditiously.

Although we understand that NASA could not require Penn State to accept a lower 

contract price, we believe the Agency should have inquired further into the basis for the 

revised proposal to ensure that it was not simply paying the unallowable fee in another 

form. Accordingly, we question $9,524 of this NRA award. 

Unsupported Tuition Costs. NASA awarded $589,895 on 12 of the 43 (28 percent) 

NRA awards in our sample without sufficient information to determine that proposed 

tuition costs were allowable. Tuition costs are allowable only if they are reasonable in 

amount and meet all of the other specific requirements of OMB Circular A-21, 

Section J.45. 

For example, in 2006, NASA entered into a 3-year cooperative agreement worth 

$321,396 with the University of Rhode Island. The agreement included $56,926 to cover 

100 percent of the out-of-state tuition costs for one graduate student. However, the 

University’s budget proposal did not contain sufficient information to allow NASA 

procurement officials to determine whether the proposed tuition costs were allowable 

under Circular OMB Circular A-21. For example, the University did not identify the 

student’s degree program or provide a letter from the registrar or other documentary 

support for the tuition costs claimed, and NASA procurement officials did not request or 

otherwise obtain this information. Instead, procurement officials said they compared the 

proposed tuition costs to similar costs on two other NASA awards. However, the 

procurement file did not contain evidence of the comparison or a description of the 

results. 

In another example, in 2008, NASA awarded a cooperative agreement to the University 

of Cincinnati valued at $590,578 for work titled, “Computational Bleed Model for 

Supersonic Inlets.” The agreement included $73,832 to cover the in-state tuition costs of 

two graduate students. However, the University’s budget proposal did not identify the 

students’ degree programs or the percentage of effort the students would provide to the 

NASA-sponsored research agreement or provide support for the amount of tuition costs 

claimed, and NASA procurement officials did not request any additional supporting 

information from the University. 

In a final example, in 2007, NASA awarded a 3-year contract to Georgia Tech Research 

Corporation for work titled “Characterization of and Concepts for Metroplex 

Operations.” The award included $26,208 to fund 100 percent of the tuition costs for two 

graduate students. However, the technical proposal stated that the students would 

provide only one-third of their time and effort to the NASA-sponsored agreement. 

Moreover, the Corporation’s budget proposal did not identify the students’ degree 

programs or provide support for the proposed tuition costs, and there is no evidence that 
RESULTS

10 REPORT NO. IG-12-011 

NASA procurement personnel considered whether it was consistent with the 

Corporation’s policy and otherwise reasonable to charge full tuition costs for students 

who would only be dedicating one-third of their time to the NASA project. 

Other Unsupported Costs. NASA awarded $1,815,740 on 6 of the 43 (14 percent) 

NRA awards in our sample without obtaining sufficient supporting information to 

determine that these costs were fair and reasonable.23

For example, NASA policy requires itemized budgets for all subcontracts.

 NASA policy establishes

requirements for adequately documenting proposed costs. However, we found that 

ARMD awards did not consistently comply with this policy. 

24

In a separate matter in 2007, NASA awarded a $608,075 cooperative agreement to Tao of 

Systems Integration, Inc. Based on our review of the procurement file and discussion 

with the contracting officer, we found no evidence that procurement officials took 

appropriate steps to ensure that proposed costs were reasonable prior to making the 

award. Specifically, the procurement file did not contain a Price Negotiation 

Memorandum or other evidence that procurement officials reviewed specific cost 

elements. Instead, procurement officials relied on a brief cost evaluation performed by 

NASA technical personnel. According to the FAR, the contracting officer is responsible 

for evaluating the proposed price and for ensuring that the final agreed-to price is fair and 

reasonable.

 In 2007, 

NASA awarded a $1,283,077 contract to San Jose State University for work titled 

“Human Workload Fast-time Integration.” Of this amount, 75 percent or $962,753 was 

for subcontract costs. However, the State University did not provide, and NASA 

procurement officials did not request, itemized budgets detailing how the subcontract 

funds would be spent. Without these itemized budgets, procurement officials did not 

have a basis for assessing the reasonableness of proposed subcontract costs. 

25

In another example, in 2010, NASA awarded a 2-year contract to Penn State valued at 

$414,380 for work titled “High Fidelity CFD Analysis and Validation of Rotorcraft Gear 

Box Aerodynamics.” The contract awarded equipment costs of $19,939 to acquire four 

identical rack mount servers. However, the contract file contained no evidence that 

procurement officials requested or otherwise obtained objective evidence supporting the 

amount of the proposed cost before NASA awarded the contract. Therefore, we 

questioned the cost of the four servers and associated indirect costs of $10,887. 

 In our opinion, the abbreviated cost evaluation performed by technical 

personnel was insufficient to determine reasonableness of individual cost elements. 

 

23 One of the 10 awards without sufficient supporting information also contained an expressly unallowable 

contractor fee and was one of the two awards previously discussed. 

24 The NASA policy requiring itemized budgets for subcontracts is found in the January 2006 edition of the 

Agency’s “Guidebook for Proposers Responding to a NASA Research Announcement (NRA),” section 

2.3.11(a), “Description of Required Budget Justification and Details.” 

25 FAR 15.404-1, “Proposal analysis techniques.”
RESULTS

REPORT NO. IG-12-011 11

After we brought this issue to management’s attention, NASA procurement personnel 

verified the accuracy of the proposed equipment costs with the manufacturer. However, 

such post-award verification is not an adequate substitute for pre-award diligence and 

determination that proposed costs are supportable. 

Conclusion

NASA awarded contracts and cooperative agreements with unallowable and unsupported 

costs because procurement officials did not exercise adequate due diligence when 

reviewing proposed costs. Specifically, procurement officials did not obtain, review, and 

document sufficient evidence to provide a basis for assessing the reasonableness and thus 

the allowability of costs. Additionally, NASA has not described the documentation that 

proposers should submit to support proposed tuition costs in accordance with the 

requirements of OMB Circular A-21. 

We projected our sample results onto the universe of 447 ARMD NRA awards valued at 

$434.7 million for the 5-year review period. Based on that projection, we estimate that 

NASA awarded contracts and cooperative agreements containing $25.2 million in 

unallowable and unsupported costs from May 2006 through January 2011. Specifically, 

we estimate that NASA awarded NRA contracts and cooperative agreements containing:

• unallowable fees of $230,000; 

• unsupported tuition costs of $6.1 million; and

• other unsupported costs of $18.9 million.

We further estimate that NASA could avoid awarding approximately $3.6 million of 

unallowable and unsupported costs annually in ARMD NRA awards by addressing the 

deficiencies we found in our sample and taking steps to ensure that procurement officials 

exclude such unallowable and unsupported costs from future NRA awards.26

Details about questioned costs in our sample are in Appendix B. Details about our 

sampling methodology and projection of results are in Appendix C. 

 

 

26 Our projection is based on ARMD’s plans for an annual funding level of $75 million for NRA awards. 
RESULTS

12 REPORT NO. IG-12-011 

Recommendations, Management’s Response, and Evaluation of 

Management’s Response 

To help ensure that future NRA awards contain only allowable and supportable costs, we 

made the following recommendations to the Assistant Administrator for Procurement:

Recommendation 1. Provide training to procurement personnel regarding the prohibition 

on fees to educational institutions and the requirements for documenting cost elements such 

as subcontracts and tuition. The training should specify appropriate corrective actions when 

procurement personnel identify unallowable fees and ensure that procurement personnel 

understand the need to have a reasonable basis for assessing the allowability of proposed 

costs.

Management’s Response. The Assistant Administrator partially concurred, stating that 

although he does not agree with portions of the analysis and conclusions that led to our 

recommendation, his office has scheduled training from April through July 2012 that will 

cover cost reasonableness determinations, documentation, and tools for analyzing 

proposed cost elements. As part of his response, the Assistant Administrator provided us 

slides of the planned training presentations. 

Evaluation of Management’s Response. Management’s actions meet the intent of the 

recommendation and therefore the recommendation is resolved. We reviewed the 

training slides and confirmed that the information covers analysis of fees, the prohibition 

on paying fees to educational institutions, and properly documenting analysis of each cost 

element, including subcontracts. Furthermore, management offered to add a discussion 

of the allowability rules contained in OMB Circular A-21 and FAR 31 if we thought it 

necessary. We will close the recommendation following the addition of this information 

and completion of the scheduled training. 

Recommendation 2. Revise the annual Guidebook for NRA Proposers to require proposers 

to submit the specific documentation needed to meet the tuition allowability requirements of 

OMB Circular A-21, Section J.45.

Management’s Response. The Assistant Administrator partially concurred. Although 

he does not agree with portions of the analysis and conclusions that led to the 

recommendation, he stated that his office will complete a review and make revisions to 

the Guidebook by February 2013 to ensure that procurement officials receive the proper 

documentation to determine whether proposed tuition costs comply with criteria in the 

OMB Circular. 

Evaluation of Management’s Response. Management’s proposed actions meet the 

intent of the recommendation and therefore the recommendation is resolved and will be 

closed upon completion and verification of the proposed actions. 
APPENDIXES

REPORT NO. IG-12-011 13

APPENDIX A 

Scope and Methodology

We performed this audit from March 2011 through March 2012 in accordance with 

generally accepted government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on the objectives. We believe that the 

evidence obtained during this audit provides a reasonable basis for our findings and 

conclusions based on our objectives. 

We limited the scope of our review to the contract award and the post-award 

administration stages because we assessed them as the most vulnerable to fraud, waste, 

and abuse. We did not review the other stages. 

To meet our audit objectives, we selected a statistically determined sample of 43 ARMD 

NRA awards from inception of the program in May 2006 through January 31, 2011. The 

sample consisted of contracts and cooperative agreements that were awarded by Ames 

Research Center, Dryden Research Center, Glenn Research Center, Langley Research 

Center, and the NASA Shared Services Center. We reviewed the first 18 awards to 

determine whether awards advanced ARMD’s research goals and produced meaningful 

results. We found that 4 of the first 18 awards were funded by the Recovery Act. We 

reviewed those 4 awards to assess effective and economical fund use and compliance 

with Recovery Act requirements.27

We considered an award to advance NASA’s research goals when (1) NASA received the 

deliverable agreed to in the procurement instrument and (2) NASA technical personnel 

found the deliverable expanded the knowledge needed to advance research goals set forth 

in ARMD project plans. For the 18 awards, we performed the following procedures: 

 We reviewed all 43 awards for cost allowability. 

Details of the audit’s sampling methodology are provided in Appendix C. 

• obtained project plans and milestones (if available) and interviewed technical 

personnel to understand the scope of research goals;

• interviewed technical personnel to confirm that NRA awards aligned with project 

plans’ research goals; 

• compared research described in project plans with research described in awards; 

 

27 Our sample of 43 awards included 7 that were funded by the Recovery Act, including these 4; we 

reviewed all 7 and found that none contained questioned costs.
APPENDIX A 

14 REPORT NO. IG-12-011 

• reviewed products, progress reports, and performance reports and interviewed 

NASA technical personnel who assessed performance; and

• corroborated testimony and personal observations with users, project officials, 

and independent sources. 

To assess whether ARMD spent Recovery Act funds effectively and economically, we 

reviewed the four Recovery Act-funded awards to determine whether: 

• the awards met requirements for funded research stated in the Recovery Act;

• the awards advanced research goals defined in ARMD project plans; and

• the awards contained properly supported and allowable costs.28

To assess whether NASA awarded costs that were allowable and properly supported, we 

reviewed a statistically selected sample of 43 awards and performed the following 

procedures: 

 

• reviewed regulations governing the allowability of costs, including the FAR, 

OMB Circulars, and NASA policies; 

• interviewed ARMD management officials and Agency procurement officials to 

identify procedures for reviewing and awarding costs; and 

• reviewed procurement files to assess whether costs were allowable and properly 

supported. 

Use of Computer-Processed Data. To meet our audit objectives, we relied on data 

obtained from ARMD’s NRA Award Tracking System as the basis for our audit 

sampling. To assess the reliability of the data, we compared information from the Award 

Tracking System to procurement records. We concluded that the data was sufficiently 

valid and reliable to support our audit conclusions.

Review of Internal Controls 

We assessed internal controls using guidance from OMB Circular A-123, 

“Management’s Responsibility for Internal Control,” December 21, 2004, and the 

Government Accountability Office’s “Standards for Internal Control in the Federal 

Government,” November 1999, and “Internal Control Management and Evaluation 

Tool,” August 2001. Circular A-123 defines five control standards and requires that 

management comply with those standards. The Evaluation Tool provides managers 

 

28 We reviewed all 7 Recovery Act-funded awards to determine whether they contained properly supported 

and allowable costs.
APPENDIX A 

REPORT NO. IG-12-011 15

guidance to implement the control standards and to determine whether improvements are 

needed. 

Our assessment of internal controls indicates that the control system gives management 

adequate assurance of effectively using NRA awards to advance aeronautics research 

goals. The assessment found no indicators of deficiencies in the control environment, 

risk assessment, information and communications, and monitoring mechanisms as they 

relate to NRA awards.

However, we found a deficiency in control activities that are used to assess proposed 

costs. Specifically, control activities did not prevent the award of unallowable and 

unsupported costs. We discuss the deficiency in our report finding, “NRA Awards 

Contained Unallowable and Unsupported Costs.” Our recommendations, if implemented, 

will correct the identified deficiencies.

Prior Coverage

During the last 5 years, neither the NASA Office of Inspector General nor the 

Government Accountability Office has issued a report concerning the use of NRAs. 

However, the National Research Council has issued two reports of particular relevance to 

the subject of this report: 

“NASA Aeronautics Research: An Assessment” (2008) 

“Decadal Survey of Civil Aeronautics: Foundation for the Future” (2006)
APPENDIX B 

16 REPORT NO. IG-12-011 

REVIEW OF AWARD COSTS

Sample 

Item

NRA Award 

Recipient

Award 

Total

Unallowable 

Fees

Unsupported 

Tuition 

Costs 

Other 

Unsupported 

Costs 

Total 

Questioned 

Costs 

1 University Of 

Tennessee $1,527,072 - $29,678 - $29,678 

2 Boeing 

Company, The 137,652 - - - - 

3 University of 

Minnesota 525,000 - 58,703a 4,485 63,188 

4 Pennsylvania 

State University 200,000 $9,524 - - 9,524 

5 

Raytheon 

Intelligence and 

Information

866,021 - - - - 

6 Pratt & 

Whitney 993,829 - - - - 

7 

University of 

Illinois at 

UrbanaChampaign

645,559 - - - - 

8 Metron 

Aviation, Inc. 1,549,855 - - - - 

9 Tao of Systems 

Integration, Inc. 608,075 - 608,075- 608,075 

10 Pennsylvania 

State University 617,797 - 85,336 85,336 

11 University of 

Cincinnati 590,578 - 73,832 - 73,832 

12 Metron 

Aviation, Inc. 1,999,993 - - - - 

13 University of 

Massachusetts 98,415 - - - - 

14 Ohio Aerospace 

Institute 235,331 - - - - 

15 Boeing Co. 867,437 - - - -

16 Lockheed 

Martin Corp. 2,987,645 - - - - 

17 General 

Electric 6,486,900 - - - - 
APPENDIX B 

REPORT NO. IG-12-011 17

Sample 

Item

NRA Award 

Recipient

Award 

Total

Unallowable 

Fees

Unsupported 

Tuition 

Costs 

Other 

Unsupported 

Costs 

Total 

Questioned 

Costs 

18 University of 

Michigan 697,825 - 57,517 57,517 

19 

Intelligent 

Automation, 

Inc.

360,000 - 9,209 9,209 

20 Pratt & 

Whitney 7,354,981 - - - - 

21 Georgia Tech 

Research Corp. 1,698,174 - 26,208 26,208 

22 University of 

Rhode Island 321,396 - 56,926 - 56,926 

23 Sensis Corp. 1,208,024 - - - -

24 San Jose State 

University 1,283,077 - 962,753 962,753 

25 

Ball Aerospace 

& Technologies 

Corp.

481,229 - 148,145b 148,145 

26 

Materials 

Research & 

Design Inc.

799,993 - - - - 

27 Ohio University 265,215 - 61,456c 61,456

28 University of 

Oklahoma 285,392 - - - - 

29 Pennsylvania 

State University 670,929 - 98,036 98,036 

30 Pennsylvania 

State University 284,461 - 26,951 26,951 

31 Virginia Tech 

University 8,639 - - - - 

32 

Seagull 

Technology, 

Inc.

2,109,740 - - - - 

33 

Northrup 

Grumman 

Systems 

Corporation

2,635,347 - - - - 

34 University Of 

Texas at Austin 657,000 - 51,566 - 51,566 

35 University of 

Minnesota 256,000 - 15,933 15,933 
APPENDIX B 

18 REPORT NO. IG-12-011 

Sample 

Item

NRA Award 

Recipient

Award 

Total

Unallowable 

Fees

Unsupported 

Tuition 

Costs 

Other 

Unsupported 

Costs 

Total 

Questioned 

Costs 

36 Brown 

University 330,000 - - - - 

37 

Massachusetts 

Institute of 

Technology 

1,690,359 - - - - 

38 

Airborne 

Systems North 

America of CA, 

Inc.

250,000 - - - - 

39 University of 

Alabama 387,827 - - - - 

40 

Krestrel 

Technology 

LLC

525,150 - - - - 

41 

Research 

Triangle 

Institute

600,528 - - - - 

42 

Honeywell 

International 

Inc.

4,379,195 - - - - 

43 Pennsylvania 

State University 414,380 12,590 30,826d 43,416 

Total $50,892,020 $22,114 $589,895 $1,815,740 $2,427,749 a

 Includes unsupported tuition costs of $58,703 and applicable indirect costs of $1,485 associated with Other 

Unsupported Costs of $3,000. 

b

 Includes unsupported contract costs of $110,000 and applicable indirect costs and profit of $38,145.

c

 Includes unsupported clerical costs of $41,807 and applicable indirect costs of $19,649.

d

 Includes unsupported equipment costs of $19,939 and applicable indirect costs of $10,887.
APPENDIX C 

REPORT NO. IG-12-011 19

SAMPLING METHODOLOGY AND 

PROJECTION OF RESULTS

For our audit, we selected a simple random sample of 43 ARMD NRA awards from the 

447 awarded since the program’s inception in May 2006 through January 31, 2011. Our 

sample of 43 NRA awards included 7 that were funded by the Recovery Act. 

NRA Awards Advanced Goals. From our sample of 43 awards, we selected a subset of 

18 awards, which included 4 of the 7 Recovery Act-funded awards, for our initial audit 

work. Our review of this subset was sufficient to determine that NASA’s aeronauticsrelated NRA awards, including awards funded by the Recovery Act, advanced the 

aeronautics research goals established by NASA (all of the 18 awards in that sample 

advanced ARMD’s goals). Therefore, we did not review the other 25 NRA awards in our 

random sample for technical merit. 

Questioned Costs in NRA Awards. We reviewed all 43 NRA awards, valued at 

$50,892,020, for questioned costs. We found that 18 NRA awards (42 percent of 

43 awards) contained unallowable and unsupported costs of $2,427,749 (4.8 percent of 

$50.9 million).

29

 Number of Awards with Questioned Costs. We are 80 percent confident that 

between 146 and 229 of the 447 NRA awards contained questioned costs (between 

33 and 51 percent), with the mean being 187 awards.

 Our analysis of the 43 statistically selected NRA awards from the total

447 awarded provides us the ability to make the following projections. 

30

 Amount of Questioned Costs. We are 80 percent confident that the dollar value 

of questioned costs contained in the 447 NRA awards, valued at $434.7 million, is 

between $11 million and $39.4 million, with the mean being $25.2 million.

 

31

 

29 See Appendix B for a breakdown of questioned costs in our sample by award. 

 

30 Statistical attribute projection, lower bound 146 of 447 NRA awards, upper bound 229 of 447 NRA 

awards.

31 Statistical variable projection, lower bound $11,045,985 of $434,744,789 NRA award dollars, upper 

bound $39,428,610 of $434,744,789 NRA award dollars.
APPENDIX C 

20 REPORT NO. IG-12-011 

Future Years. We estimate that NASA could avoid awarding approximately 

$3.6 million of unallowable and unsupported costs annually in ARMD NRA awards by 

addressing the type of deficiencies we found in our sample. We obtained our estimate by 

applying the 4.8 percent of questioned costs in our sample to ARMD’s $75 million 

annual NRA funding level as follows: 

 ARMD’s annual NRA funding level $75,000,000 

 Multiplied by percent of questioned costs in sample x 0.048

Estimated annual savings $3,600,000 
APPENDIX D

REPORT NO. IG-12-011 21

MANAGEMENT COMMENTS
APPENDIX D

22 REPORT NO. IG-12-011 
APPENDIX D

REPORT NO. IG-12-011 23
APPENDIX E 

24 REPORT NO. IG-12-011 

REPORT DISTRIBUTION

National Aeronautics and Space Administration

Administrator

Deputy Administrator

Chief of Staff

Associate Administrator for Aeronautics Research

Assistant Administrator for Procurement

NASA Advisory Council’s Audit, Finance, and Analysis Committee 

Director, Ames Research Center

Director, Dryden Flight Research Center

Director, Glenn Research Center

Director, Langley Research Center

Executive Director, NASA Shared Services Center

Non-NASA Organizations and Individuals

Office of Management and Budget

Deputy Associate Director, Energy and Science Division

Branch Chief, Science and Space Programs Branch

Government Accountability Office 

Director, Office of Acquisition and Sourcing Management 

Congressional Committees and Subcommittees, Chairman and 

Ranking Member

Senate Committee on Appropriations 

Subcommittee on Commerce, Justice, Science, and Related Agencies

Senate Committee on Commerce, Science, and Transportation

Subcommittee on Science and Space

Senate Committee on Homeland Security and Governmental Affairs

House Committee on Appropriations 

Subcommittee on Commerce, Justice, Science, and Related Agencies

House Committee on Oversight and Government Reform 

Subcommittee on Government Organization, Efficiency, and Financial Management

House Committee on Science, Space, and Technology 

Subcommittee on Investigations and Oversight 

Subcommittee on Space and Aeronautics
REPORT NO. IG-12-011 25

Major Contributors to the Report: 

Raymond Tolomeo, Director, Science and Aeronautics Research Directorate 

Nora Thompson, Project Manager 

Jobenia Odum, Management Analyst 

James Pearce, Auditor 

Robert Rose, Auditor 

Arnold Pettis, Data Mining, Statistician, Application Developer

Frank Mazurek, Legal Counsel 
APRIL 30, 2012

REPORT No. IG-12-011 

OFFICE OF AUDITS

OFFICE OF INSPECTOR GENERAL

ADDITIONAL COPIES

Visit http://oig.nasa.gov/audits/reports/FY12/ to obtain additional copies of this report, or contact the 

Assistant Inspector General for Audits at 202-358-1232. 

COMMENTS ON THIS REPORT

In order to help us improve the quality of our products, if you wish to comment on the quality or 

usefulness of this report, please send your comments to Mr. Laurence Hawkins, Audit Operations and 

Quality Assurance Director, at Laurence.B.Hawkins@nasa.gov or call 202-358-1543. 

SUGGESTIONS FOR FUTURE AUDITS

To suggest ideas for or to request future audits, contact the Assistant Inspector General for Audits. 

Ideas and requests can also be mailed to:

Assistant Inspector General for Audits 

NASA Headquarters

Washington, DC 20546-0001 

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