NSF Network Fund Has No Accountability or Govt. Oversight

Communications Daily

December 4, 1992

Fund established by National Science Foundation (NSF) to reimburse govt. for private use of its high-speed computer network purposefully is being withheld from public scrutiny by private company maintaining fund. Govt. maintains no control or oversight over fund. Even NSF official who approved its creation said agency doesn't know how large it has grown, or how or when it will be disbursed. For-profit company charged with establishing fund also declined to provide any details, even though it has been collecting money for more than year.

Fund is unaudited and all money it contains simply has been rolled into "general fund" of private company's operating budget, Communications Daily learned in 2-month investigation. Office of Management & Budget (OMB) didn't even know of fund's existence; when provided with details, OMB budget examiner told us: "This sort of thing raises all the red flags associated with a slush fund."

Fund was created 2 years ago as part of compromise deal between NSF and Merit, govt. grantee responsible for R&D high-speed computer network NSFNet. According to internal NSF documents we obtained, agreement was reached Sept. 10, 1990, but wasn't made public until almost year later. Deal gave Merit's nonprofit subcontractor, Advanced Network & Services (ANS), exclusive right to sell access to federally funded network to private companies. Internal NSF documents show that fund is designed to hold money collected from surcharge levied on private users of NSFNet, which was established for use by research institutions. NSF documents clearly state that money in fund is intended to be used "to enhance (NSFNet) infrastructure and services." Despite that NSF requirement, to date no such funds have been distributed.

All money flowing into fund is being held by ANS for-profit subsidiary called ANS Commercial + Research (CO+RE), said ANS Chief Financial Officer Robert Harris, who holds same post at CO+RE. Harris told us there's no special accounting of fund and that money held by it is merely lumped into "general fund" of CO+RE's operating budget. All parties involved -- NSF, Merit, ANS -- denied responsibility for administration or oversight of fund. When we questioned NSF Computer Networking Dir. Stephen Wolff about status of fund he said he "didn't know" and would contact ANS for details. Those details never came, despite repeated attempts by us and Wolff to gather information about fund from ANS. When we asked Wolff specifically who was responsible for fund, he said: "Merit."

But Merit Pres. Eric Aupperle told us his organization had no responsibility because fund originally was proposed by ANS Pres. Allen Weis. "This whole (fund) thing was ANS's idea... you'll have to ask ANS about it," he said. We did ask ANS about fund and received similar denial of any responsibility. However, spokeswoman Susan Eldred did tell us so-called Resource Allocation Committee (RAC) had ultimate responsibility for fund. According to Eldred, RAC is 17-member committee organized just 6 weeks ago. Although she said she knew other members of RAC, she declined to provide names, saying she wasn't group's official spokeswoman. We have learned through other sources that RAC includes ANS's Weis, Merit's Aupperle, NSF's Wolff. Other members are drawn from computer sites connected to NSFNet. One RAC member we interviewed said committee was "hastily thrown together just 3 weeks after you guys (Communications Daily) starting asking questions" about fund's oversight.

RAC has had only one meeting -- Oct. 23 multiparty telephone conference -- in which not even all members took part, said an RAC member. Teleconference didn't resolve much -- even RAC members haven't been fully informed about fund's status. However, RAC members are keeping in contact via electronic mail, according to several hundred such messages released under Freedom of Information Act. One of those electronic messages offers insight into how RAC, NSF, Merit and ANS are trying to shape committee's policy to stay ahead of criticism that has plagued embattled NSFNet for several years (CD July 7 p1). Message from RAC member Michael Staman to other committee members on question whether ANS should release details of fund to public said: "You have a lose-lose situation here. Fail to disclose it (amount held in fund) and continued criticism will accrue... Disclose (amount in fund) and at least 3 items will happen simultaneously: (1) Incredulity at the number (no matter what the size). (2) Calls for accounting (no matter what the size). (3) Reemergence of the same criticism as if you selected option 1. You (ANS) are in a unenviable and difficult position. There have been so many problems over the past couple of years that you probably cannot win on this one either..." Staman ended note by voting for nondisclosure of fund to public.

Questions about fund continued to surface when we contacted NSF Inspector Gen. (IG). Source in IG's office told us that existence of fund was "of some concern" but that IG wouldn't be undertaking full audit until NSF's contract with Merit runs its full course by April 1994. IG source said it was unclear even as to whether it had any recourse at all: "Legally, you know, this (fund) is definitely a dicey thing. This type of agreement is really a new kind of animal. We've never seen anything like it before. This is all new ground." IG said that even if ANS officials used fund to "line their own pockets," govt. would have no recourse "because the government has no control or responsibility."

Critics of NSF's association with Merit have long advocated changes to clarify Merit's accountability to govt. oversight. House Research Subcommittee oversight hearing (CD March 13 p1) called on NSF/Merit to answer some questions, but few issues were resolved. NSF IG currently is reviewing several aspects of NSFNet program (CD July 17 p9) stemming directly from hearings. However, issue of fund so far hasn't been one of them.