General Accounting Office: Indirect Cost Probe Still in Preliminary Stages

The U.S. General Accounting Office (GAO) has only just begun its examination into Harvard Medical School's government billing practices, a federal investigator said yesterday.

The Harvard probe officially began April 3, but the GAO has yet to move beyond the most preliminary stages, the investigator said. The GAO has not finished examining the University's own report, compiled by the outside accounting firm Coopers & Lybrand.

"I don't think they [the government] have anything yet," said the investigator, who spoke on condition of anonymity. "They're very preliminary."

The federal probe, now underway at several campuses nationwide, examines universities' use of overhead funds in government-sponsored research projects. The Harvard inquiry comes only months after the government released information showing that Stanford University had used overhead monies for inappropriate expenditures.

The House Subcommittee on Oversight and Investigations, chaired by U.S. Rep. John D. Dingell (D--Mich.), commissioned the GAO to investigate Harvard and is currently beginning preliminary work for a similar investigation at MIT.


GAO investigator Joseph Cohen, who is in charge of the Harvard effort, refused to comment on any specific developments in the inquiry.

New Policies

Meanwhile, in Washington D.C., Congressional leaders are considering new policies that would further restrict indirect cost reimbursements, said the federal investigator, who works for the subcommittee.

"It's likely that there will be new legislation to tighten up the process, tightening up the rules," the investigator said.

The executive branch has also begun to take steps aimed at reshaping indirect cost policy.

The Office of Management and Budget is considering revisions in its Circular A-21, which sets the guidelines for appropriate billing of indirect costs. These revisions would disallow reimbursements for first-class travel, alcohol purchases and items relating to the university president's home, according to the subcommittee investigator.

In addition, federal agencies have expanded the scope of their investigations, looking at a number of universities across the nation in an attempt to stem funding misuses.

Tomorrow several of these agencies, including the Department of Health and Human Services (HHS), will testify before a Congressional committee about their ongoing inquiries.

HHS, which sets the cap for Harvard's indirect costs, is auditing 13 schools, including Johns Hopkins, Dartmouth, Yale and Duke. HHS is currently negotiating with Harvard to establish a new indirect cost rate and has proposed a new provisional rate of 63.5 percent to replace the old rate of 88 percent.

This means that for every dollar the Medical School receives in research grants, the University would receive 63.5 cents. The final indirect cost rate for the Medical School will likely be near the proposed provisional rate of 63.5 percent, an informed source said last week.

Every percentage point in the rate is worth about $200,000 to Harvard. If the final rate is 63.5 percent, nearly 33 points lower than the 96 percent rate Harvard asked for, then the University would be entitled to $6 million less than it wants each year.

Harvard announced several weeks ago that it would cut $500,000 from this year's indirect cost bill. The University withdrew requests for reimbursement of costs which include funds used for a senior dean's retirement party and any costs relating to the home of President Derek C. Bok.

These kinds of costs have in past years been billed to the federal government without concern, Harvard's report said