U.S. Clamps Down on Museum Grants : Museums: The Los Angeles County Natural History Museum is among 19 institutions that National Science Foundation auditors are examining.

The Los Angeles County Museum of Natural History has lost its eligibility to apply for new federal support from the National Science Foundation in a dispute over more than $250,000 in grant money the government contends may have been misspent.

The science foundation has relaxed the ban on new grant funding in one instance in the last few weeks, but the situation is somewhat ironic since Craig C. Black, the Natural History Museum’s director, is the only museum executive in the country on the National Science Board--the 22-member governing body of the science foundation.

Details of the dispute emerged in government documents obtained by The Times this week. Museum and government officials discussed it in telephone interviews.

Four representatives of the Natural History Museum were in Washington on Tuesday for meetings with science foundation officials to try to resolve the financial dispute, which arose after federal officials moved last year to tighten scrutiny of the fiscal affairs of many of the the nation’s federally supported science museums.

Los Angeles museum officials said they hope a resolution can be reached in the next several weeks. Government auditors have demanded the return of a total of $254,759 in 21 Natural History Museum grants issued from 1982-87.

The science foundation said it has found no evidence of criminal activity in any of the disputed grants despite the loss of government grant eligibility--even if it is only short term.

The decision by the science foundation apparently signals a change in attitude among federal funding agencies that support museums and some other types of research institution.

The science foundation has completed or scheduled audits for 19 museums under the new program. Previously, federal funding agencies normally administered in-depth grant audits in the cases of universities receiving large amounts of research funds, leaving the museum community comparatively uninvestigated.

Although museum officials across the country said they are regularly required to comply with federal financial regulations, the science foundation said museums had simply not been subjected to rigorous government fiscal review in recent years.

“It’s not embarrassing. It does mean I’ve had to keep quite a distance away from what’s going on in terms of avoiding the appearance of a conflict of interest,” Black said. “I don’t take it as anything unusual or having the museum singled out. I think what it indicates is that museums are playing more and more of a role in many of the programs (supported by the National Science Foundation.)

“It is only fitting that they undergo the same sorts of scrutiny. I think we have right on our side (but) that doesn’t always mean that you win.”

Mark Rodriguez, chief deputy director of the Natural History Museum said the science foundation last audited the institution in 1979. Rodriguez said the Los Angeles County Museum of Natural History Foundation--the private charity that is the county-owned museum’s operating entity--conducts its own audit annually and that the museum foundation is regulated by state officials.

But last year, Congress set up an inspector general’s office in the science foundation with instructions to extend close government scrutiny to the fiscal affairs of a much wider variety of research grant recipients.

The list of 19 prominent museums undergoing in-depth audits includes six West Coast institutions and one in Arizona, the science foundation said, but so far the L.A. museum foundation is the only organization anywhere in the country ruled ineligible for new federal funds.

The local museum is the only West Coast institution to complete the new government audit, though government records show eight of the 19 museum audits have concluded. The science foundation said that scheduled for visits by federal auditors in the next few months are the California Museum of Science and Industry in Exposition Park, the San Diego Natural History Museum, the California Academy of Sciences in San Francisco, the Exploratorium in San Francisco, the Pacific Science Center in Seattle and the Museum of Northern Arizona in Flagstaff.

The science foundation first notified the Natural History Museum that audit discrepancies could result in loss of eligibility for new federal grants last May--weeks before the government audit team’s June 26-30 visit to Los Angeles.

Documents obtained by The Times indicate the science foundation took the action several months after an outside auditor working on government contract first uncovered the discrepancies. Black said the science foundation formally moved to withdraw eligibility late last year.

The questioned grants had a total value of nearly $2.4 million. The major element in the dispute--nearly $160,000 of the total the government seeks to recover--is a disagreement over the percentage of each grant the museum may apply to “indirect costs”--its general overhead expenses.

But the science foundation has also asserted that museum researchers double-billed more than $13,000 in alleged equipment costs to two different grant budgets, spent $1,198 on an outboard motor without government authorization, improperly spent $891 on a personal computer and charged the government $706 for a researcher to attend a seminar in dissertation writing.

The government audit report said the Natural History Museum’s accounting procedures showed evidence of “significant instances of noncompliance with federal laws and regulations, grant conditions and material weaknesses in internal controls.”

The deficiencies, the audit report concluded, may render the museum’s fiscal controls “inadequate for federal awards.” The museum’s payroll procedures were so slipshod, the government audit found, that employee time cards had commonly been altered with white-out after the fact, making it difficult to determine what payroll costs were actually applicable to federal grant projects and which were not. Both the museum and the science foundation said the museum has made a major effort to correct deficiencies.

Elsewhere in the country, such well known centers as the American Museum of Natural History in New York, the Field Museum of Natural History in Chicago, the Missouri Botanical Garden in St. Louis, the Academy of Natural Sciences of Philadelphia and the Houston Museum of Natural Science have either undergone audits in the last few months or are scheduled to be surveyed this year.

Cliff Bennett, the assistant science foundation inspector general in charge of the museum audit program, said government officials discovered dozens of museums that receive federal support that had not undergone meaningful financial review in from three to eight years.

Founded in 1950, the science foundation, which has a fiscal 1990 budget of just over $2 billion, makes research grants to support scientific inquiry all over the country. A spokesman said the vast majority of money is channeled to university-based researchers and research organizations--exclusively in the fields of science and engineering.

But the spokesman said there was no quick way to calculate a proportion of the total devoted to museum grants. The science foundation emphasized that selection of the 19 museums targeted for government audits was not motivated by suspicion of wrongdoing at those specific institutions, but reflected a recognition that the federal government had not previously maintained adequate scrutiny over museum business affairs in general.

Bennett noted that, until last year, the science foundation relied on outside accounting firms or auditors employed by the Departments of Defense or Health and Human Services to include science foundation grants in their larger reviews. “But when the Department of Defense does an audit, we are sort of just shoved under the mat,” Bennett said. “We are now trying to get into (institutions) on a more timely basis.

“Our hope is to assist these entities. We’re not really out there to beat them over the head or to try to take money away from them, especially places like museums.”

In the last two fiscal years, the National Endowment for the Humanities, which operates its own museum-auditing program, said it has conducted on-site audits at just five museums nationwide.

Rodriguez said the Natural History Museum’s indirect cost rate is 34.5% of each grant and that the science foundation had demanded a reduction to 13.5%. Black said that, at the time of the audit, the museum actually intended to seek a increase.

Rodriguez and Black said the museum tried repeatedly, beginning in 1984, to renegotiate the allowable rate of indirect costs. The practice of charging some general overhead to the budget of a specific grant is commonplace in all university and research institutions. The National Endowment for the Humanities, which supports museums and scholarly institutions, said typical overhead cost rates for museums range between 7% and 40%, with 15 major museums it funds averaging 19%.

Rodriguez said that science foundation officials have been generally cooperative in regard to interpretation of the museum’s ineligibility for new federal funds. The science foundation has held the museum cannot apply for or receive any new government money until the dispute is resolved. However, Rodriguez said that when museum officials told the science foundation they would lose private matching funds for a new bird hall unless $520,000 in government grant funds was released, the science foundation exempted the grant in question from the ban.

Rodriguez said that, even if the government turns down the museum’s appeals, repaying of the $254,000 in question would not pose a serious problem for the museum. The government audit was limited to the finances of the Natural History Museum Foundation, which provides $4.4 million of the museum’s $16.2 million annual operating budget. The audit did not directly involve the $9.5 million the museum receives from the County Board of Supervisors. The museum also generates $2.2 million in revenues from such sources as admission charges and parking.

There was also a serious disagreement about whether the museum acted quickly to change its accounting procedures after a government-employed private accounting firm surveyed the museum in 1988. Bonnie Van Dorn, executive director of the Washington-based Assn. of Science-Technology Centers, said the government audit initiative involving museums does not necessarily represent a major change in policy.

“Certainly science museums are growing, have become more sophisticated and are applying for larger amounts of federal grant monies,” Van Dorn said. “I would expect that they would be subject to stricter audit standards. Audits happen all the time when you are a federal grantee.”

Van Dorn said Black’s role on the science foundation’s governing board complicated the audit of the Natural History Museum only in the sense that “it’s got to be handled very, very carefully so that there’s no oversight. Everyone wants to be sure this is done by the book.”