JHU admits illegal billing Audit shows school charged U.S. for "unallowable" costs.

September 10, 1991|By Melody Simmons | Melody Simmons,Evening Sun Staff

Johns Hopkins University administrators have admitted, as a result of a federal audit, to wrongfully billing the federal government $89,119 in 1987 for liquor, flowers and catering costs as science research.

That amount is in addition to the $97,000 "cushion" the university built into its estimates of indirect costs to subsidize 1987 federal research projects. Indirect costs, which are also funded by the federal government, cover overhead expenses such as electric bills, building maintenance for research labs and administrative offices and library costs.

Auditors from the U.S. Department of Health and Human Services arrived at Hopkins on March 25 to probe the 1987 ledgers for suspected overcharges of $175,183 from the university's $49 million indirect cost billings.

"We're acknowledging that, when it prepared its 1987 indirect cost report to the government, the university missed some expenses that were either unallowable or not appropriate for reimbursement," said Eugene S. Sunshine, Hopkins vice president for administration, in a prepared statement issued yesterday.

The review came at a time when the federal department was checking indirect costs at the top 12 research universities in the nation after it was revealed that Stanford University had wrongfully billed the government $500,000 for "research-related" expenses that included a designer commode, flowers, antiques, bedsheets and maintenance of the university's 72-foot yacht. Other institutions investigated include Yale, Dartmouth, Washington University in St. Louis, Rutgers University and the University of Pittsburgh.

The government annually awards about $9.2 billion for research and an additional $2.5 billion for indirect costs. The indirect costs stem from a formula negotiated between the schools and the government. At Hopkins the amount is 65 percent of the total research award.

When the Hopkins audit started, administrators admitted to wrongfully charging $33,000. The amount increased by $56,119 as of yesterday.

The auditors were still at Hopkins yesterday when university spokesman Dennis O'Shea said there is "no definite date" set for the completion of the audit.

O'Shea said the updated costs disallowed by the auditors include some expenses from a 1986 reception for retiring Hopkins provost Richard P. Longaker at the Hyatt Regency Hotel, which totaled $23,143.57. Other disallowed costs were for purchases at a local liquor store, travel, lunches and receptions, florist bills and catering costs. It was unclear whether a $1,400 trip to Germany by former Hopkins President Steven Muller for a conference was disallowed, O'Shea said.

Hopkins administrators were still disputing a $13,761 charge to the government for rental of an apartment for physicians from Guys Hospital in London who come to Hopkins to perform research.

He said the impact of the $89,119 overcharge could affect Hopkins' indirect cost billings from 1989-1992 since the 1987 indirect cost total is used as a base to compute future indirect cost formulas. The auditors could reopen negotiations based on the indirect costs billed from those years, O'Shea said.

The university started a new travel policy July 1 to "screen out expenses that cannot be charged to the federal government," Sunshine said.

"We've also assured the government that we've taken steps -- including revision of university travel policy and accounting procedures -- to make sure that our future reports do not contain even this relatively small level of inaccuracy," Sunshine said.

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