TWO of the most prestigious universities in the United States have acknowledged that they overcharged the government for overhead expenses related to federal research grants. Both Stanford University and Harvard Medical School have agreed to return $500,000 billed to the government, but questions remain about millions of dollars in additional overhead charges. The General Accounting Office and the Department of Health and Human Services are investigating the billing practices of some of America's other premier research universities, including MIT, the University of California at Berkeley, the University of Michigan, the University of Chicago, Johns Hopkins, and Duke. A congressional subcommittee has also launched a probe.
At issue are "indirect costs" that universities may charge the government in performing federal research. Direct research costs - like laboratories and researchers' salaries - are easily calculated. Less readily computed is the overhead for administrative services, library facilities, and utilities that universities can properly allocate to federal projects.
Because such costs cannot be precisely broken out, federal regulations permit universities to charge the government a percentage of direct costs to cover overhead. But the universities may include in indirect costs only genuine operating expenses with some bearing on the research.
A federal audit has determined that Stanford billed the government for, among other things, furnishings and flowers in the president's residence and depreciation on a university yacht. And this month Harvard Medical School withdrew costs it identified as accounting errors.
The problem doesn't appear to stem from dishonesty. Rather, the universities employ aggressive accounting practices, encouraged by vague rules and lax oversight.
These dubious billing practices shouldn't be allowed to continue. Research universities have to tighten their accounting standards, as Stanford has taken steps to do, and federal audits have to be more regular and thorough. American taxpayers get good value for their research dollars; let's keep it that way.