HEW Releases Draft of Audit Following Request of Congress

In an apparently unprecedented action by federal officials yesterday, the Department of Health, Education, and Welfare (HEW) released the full text of a preliminary draft audit recommending the return of $2.5 million "improperly charged" to federal grants at the School of Public Health.

"I can't remember the last time a draft of an audit like this was released," John Blamphin, an HEW spokesman, said last night. He said HEW decided to release the report in response to the request of a Congressional committee and to partial news accounts about the audit which appeared in the national press this week.

Harvard revealed in a news release Tuesday that the audit recommends the return of $2.5 million and that auditors questioned $15 million in salaries allegedly recorded improperly in the school's accounts. But the University did not release the text of the audit.

Throughout the audit, HEW officials charge Harvard with sloppy bookkeeping and insufficient supervision of expenditures.

"The payroll distribution system and related internal controls was not in compliance with federal regulations," the 60-page audit states, adding, "and the system that was used and currently in use does not provide reasonable assurance that direct costs for the personal services of professorial and other professional staff were either proper or reasonable."

Congressional subcommittees studying abuses of the federal grant system are reviewing the draft audit, which was released simultaneously in Washington and Boston.

The University paid about 68 per cent -or $37.1 million--of its expenses during the period audited with 750 federal grants. Three years ago, the school had to return $132,000 to the National Institute of Health for similar infractions of the complex federal regulations covering federal grant expenditures.

"We would have preferred to have the opportunity to respond to the report before it was released," Thomas O'Brien, financial vice president, said yesterday. "There is a big difference between accountability and accounting," he said, adding, "We think we have been very responsible."

Harvard officials may "negotiate" with HEW in the next few months, explaining their accounting procedures and possibly reducing the amount for which HEW demands reimbursement.

"No one has any idea how much Harvard will have to return once the negotiation process is complete," Rick Barton '71, a spokesman for the Boston office of HEW, said yesterday.

While the process of negotiation continues, HEW is also auditing the expenditure of federal grants in the Medical School and the College.

Sources in Washington said Eileen Shanahan, assistant secretary of HEW, released the report after Congress asked to see the preliminary results of the audit.

Phin Cohen, former professor of Nutrition at the School of Public Health, had also petitioned HEW for a copy of the report. Cohen, whose testimony before Congress sparked the audit, is suing Harvard, charging he was not reappointed to the school's Faculty because he publicly 600 transactions charged to federal funds were being misused by his superiors at the school.

HEW auditors studied School of Public Health accounts by selecting a sample of 600 transactions charged to federal funds over the three-year period. While they found no evidence of deliberate misuse of funds, the auditors reported improper of insufficient accounting procedures in nearly all areas. They used the sample to estimate $2.5 million in doubtful expenditures.

"You have to remember that academic persons are not bookkeepers," Howard Levy, assistant dean for Finance at the school, said yesterday. "The system is improving steadily," he said.

Levy suggested that the 12-man auditing team that spent about 18 months working on the audit, "spent more of the taxpayer's money reviewing our accounts than they will recover for finding minor infractions of the rules."

But a researcher affiliated with the school said Thursday her attempts to process the paperwork for a small federal grant last September took two months to complete.

"It was Harvard that messed it up," the researcher said, "because they kept giving me conflicting instructions." She called the medical area's business office "an elephant's graveyard.