U.S. Will Investigate Med School Finances

The Harvard Medical School will soon be a target of a federal probe to determine whether the school has unfairly billed the government for overhead costs on research grants, The Crimson learned from federal investigators yesterday.

The U.S. General Accounting Office will begin looking into the Medical School's ledgers in March after it completes a related investigation at Stanford University, according to members of the House of Representatives Oversight and Investigations subcommittee.

"On March 1, the staff will be available at the General Accounting Office to begin investigating Harvard Medical School," said one congressional investigator who asked to remain anonymous.

At this point, the subcommittee has no evidence of any wrongdoing by Harvard but has decided to investigate the Medical School after discovering incidents of overbilling at Stanford, the investigator said.

The investigative team has not yet informed the University of its intended inquiry, said another investigator who also asked to remain anonymous. He added that the subcommittee will likely inform Harvard in March, shortly before the probe begins.

Asked about the investigation, Vice President and General Counsel Daniel Steiner '54 said the University had not been officially informed of the probe.

"That doesn't mean there is not going to be one," Steiner said. "But we have not been notified of an investigation at this time." Steiner refused further comment on the situation.

Likewise, other Harvard administrators--among them Vice President for Finance Robert H. Scott--said yesterday that they believed Harvard has complied with all government regulations concerning federal funding of indirect costs, expenditures that are supposed to be tagged for research-related needs.

Investigators emphasize that they are examining the Medical School because its high rate of indirect costs is "hard to believe.' Investigators have discovered incidences of overbilling at Stanford and suspect that this practice may occur at other schools with high indirect costs.

One investigator said that "enough problems were raised at Stanford" to consider looking into the management of indirect costs at other schools.

"If Stanford had come up clean," the investigator added, then the team would probably not have decided to look at the Medical School or at any other universities.

The Massachusetts Institute of Technology (MIT) is likely the next target for an inquiry after the Medical School, one investigator said. Columbia, Cornell and Yale may also be investigated.

At MIT, Robert C. Dilorio, associate director of the news office, said the university had not been notified of a federal investigation.

Indirect Costs

When the government awards a research grant to the Medical School, the University receives an additional sum of money, to cover "indirect costs," over and above the amount of the grant.

Reimbursements for indirect costs are slated for expenses for needs such as lighting, heating and renovating laboratories, which aid the school in conducting its research.

The Medical School's indirect cost rate is now 88 percent, according to the school's administrator of financial affairs Angela R. Foss.

This means that for every dollar that the government awards faculty members in grant monies, the University receives an additional 88 cents, which is to be used as overhead but is not specifically earmarked by the government for certain expenses.

Because government auditors are years behind on reviewing the accounts of universities, schools may have been able to classify as indirect costs items that are in no way related to research, according to an article in The New York Times last fall.

The investigators do not know if this situation has developed at the Medical School, but top University administrators say Harvard has not overcharged the government.

Scott said that he believes the University has followed regulations concerning indirect costs.

"We work very hard to make sure we do [follow regulations]," Scott said. At the time of the interview, Scott said he was not aware of any planned federal inquiry.

At the Medical School, Foss said she believed the institution would not be implicated in any wrongdoing. "I think we'll come out clean because I believe Harvard is above board on all of this," Foss said.

Why Harvard?

The Medical School's indirect cost rate of 88 percent eclipses those of all other academic institutions, including Stanford's 74 percent, an investigator said. It is this high rate which has made the school a target of inquiry.

"What can they be doing with the money?" one subcommittee investigator asked, adding that the question is posed for the reason of curiousity, not accusation.

"We're concerned that the rate is so high," the investigator said. "How can it cost this much money to do research?"

The University gives the money for indirect costs to the Medical School for renovations, overhead, and other research-related needs, according to Scott.

"All of the monies that Harvard receives in indirect costs for Medical School grants are returned to the Medical School," Scott said.

The school began negotiations with the the Department of Health and Human Services in July to raise the indirect cost rate to above 100 percent, a change which would give the University more than one dollar in indirect costs per dollar in grant monies.

The Medical School originally sought a rate of 114 percent, according to one of the investigators, but has now lowered its request to 104 percent. If the school receives the new increased rate, it will mark the highest rate of any university, medical school or research hospital.

Scott said he does not expect "a tremendous change" in the indirect cost rate.

Stanford's Costs

During the probe at Stanford launched by the subcommittee in October, investigators found that the university had been allotting hundreds of thousands of dollars of indirect cost funds to cover the depreciation on a 72-foot yacht, floral arrangements at the home of President Donald Kennedy '52, and the refurbishment of a grand piano at the President's home, according to a report published last month by The Boston Globe.

"Neither I nor the taxpayers financing these costs consider [these charges] proper," Rep. John D. Dingell (D--Mich.), chair of the subcommittee wrote, The Globe reported. Dingell is also chair of the House Committee on Energy and Commerce, which formed the team of investigators.

Stanford officials have admitted that they made a mistake in billing for the yacht and some other items, and the university recently agreed to repay the government $184,286. However, the investigation at Stanford is not yet complete.

Joshua A. Gerstein contributed to the reporting of this story.