High on the Trough at Stanford

March 19, 1991|By DANIEL S. GREENBERG

WASHINGTON — Washington. Caught red-handed padding its research bills for the federal government, Stanford University has responded with an extravaganza of alibis that should dispel fears that creativity is on the wane in America.

As the story unfolded at a congressional hearing last week, Stanford, the academic jewel of the West, was bubbling with ideas for explaining away the yacht, the presidential wedding party, flowers and linens, the antique Italian commode, the trustees' meeting at a Lake Tahoe resort, and the university-owned shopping center. All were partially charged to Uncle Sam as ''indirect costs'' of performing government research, and they contributed to Stanford's harvest of $85 million in reimbursements last year.

How could those items possibly be associated with the conduct of scientific research? Easily and legitimately, an accountant hired by Stanford, William T. Keevan, of Arthur Andersen & Co., explained to incredulous congressmen:

''The key test for the reasonableness of costs such as linens and flowers in the [university] president's house is whether those costs are prudent and necessary for the overall operation of the university, despite the fact that they have no direct relationship to research. Major considerations involved in determining reasonableness include whether the cost is consistent with the university's established policies and practices, and whether the cost is prudent and generally recognized as necessary for the operation of the institution. We understand that Stanford's Board of Trustees has confirmed that these types of costs meet these criteria.''

Stressing Stanford's contributions to the advancement of human knowledge, the university president, Donald Kennedy, somberly testified that Stanford had actually withdrawn some charges to the government, not because they were unjustified, but because of his concern about appearances. Thus Stanford canceled the bill, estimated at $4,000, for the government's share of a $17,500 wedding reception that the university trustees held for him and his bride.

That was a ''perfectly appropriate'' expenditure, Dr. Kennedy said, but ''I determined that, regardless of its legality, no portion of the cost of that reception should have been charged to the taxpayer, and I have directed that it be withdrawn.'' Also withdrawn from the ''research'' accounts were bills totaling $680,000 for his residence on campus, depreciation on a Jacuzzi-equipped yacht donated to the university, plus various other items. In the process of being withdrawn, Stanford officials say, are $700,000 in administrative costs for a shopping center owned by the university.

''Indirect costs'' is the bookkeeping term for costs generated by the presence of government-financed research, but not directly covered by a research grant. A legitimate example would be heavier library usage by scientists on campus, wear and tear on laboratories, and a bigger clerical workload. Recognizing that they're all real and expensive burdens, Washington tacks a percentage onto research grants to help our hard-pressed universities.

The percentage is calculated by adding up all the costs associated with research. Since the bigger the sum, the higher the rate, the incentives are there for throwing in everything conceivable. Stanford, however, crossed the line into the inconceivable in working its way up to an indirect-cost rate of 74 percent -- a standard percentage for big- league research institutions.

Government auditors have acknowledged their laxity in checking the university's accounts. But now they're on the job, vengefully, it seems, with a recommendation that the rate be reduced to 52 percent. That would translate to a $30 million reduction in Stanford's take from Washington.

Rep. John Dingell, D-Mich., who chaired the hearing, lectured Dr. Kennedy and the Stanford entourage that support for research is diminished when funds are diverted to a shopping center, a wedding party, and a yacht. The facts, Mr. Dingell said, indicate ''incompetence, rascality, or both.'' He added: ''The record today does you and your university no credit.''

Stanford's financial gyrations are under criminal investigation by government agents. Meanwhile, Congressman Dingell is planning to look at the bookkeeping practices of other eminent universities.

Daniel S. Greenberg publishes the newsletter Science & Government Report.

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