The University may owe the federal government more than $1.6 million, according to a report released by the Office of the Inspector General of the U.S. Department of Health and Human Services.
Negotiations between the government and Duke were sparked by OIG's January report, "Review of Administrative and Clerical Costs at Duke University for the Period October 1, 2002, through September 30, 2004." The report states that the University made excess charges to federal grants, and in addition to the charges, should also revise its policies.
Between 2002 and 2004, the University received reimbursement from the government for $594,104,781--the amount charged to 2,566 grants, contracts and other agreements.
But after reviewing a request from Duke, OIG issued the report recommending that the University refund nearly $2.4 million to the federal government. OIG said the University had misused federal funds to pay administrative and clerical staff members. The recommended amount was revised to $1,661,011, however, after the University objected to OIG's use of a statistical sample to estimate the total unallowable costs.
By entering into contracts with the federal government in order to receive funding, the University agreed to comply with specific federal regulations controlling the use of the funds. The guidelines state that the costs charged by the grant recipients must be "reasonable, be allocable, conform to any exclusions or limitations set forth in the cost principles or sponsored agreements, and be given consistent treatment through the application of generally accepted accounting principles."
Additionally, the guidelines specifically state that charges for administrative and clerical expenses, as well as "items such as office supplies, postage, local telephone costs and memberships," are not allowed, unless they are used for a "major project."
The original agreement defined "major projects" as those that necessitate an "extensive amount of administrative or clerical support, which is significantly greater than the routine level of such services provided by academic departments."
The report seeks to encompass hundreds of grants the National Institutes of Health have given to the University, but the audit only looked at a few of them, and then extrapolated the total amount that the University owes, explained Michael Schoenfeld, vice president for public affairs and government relations.
Furthermore, the OIG report recommended that the University revise its policies to better comply with the federal government's guidelines for proper use of funding. Although the University agreed that some funds might have been used inappropriately in the past, the report said that the University maintains that the existing policies regulating use of federal funds comply with federal requirements, and HHS had not properly applied allowability standards.
"We are engaged in a large and complex enterprise, so naturally there will be questions about what expenses get charged to what account," Schoenfeld said. "Sometimes there are misinterpretations of the guidelines when you are dealing with complex guidelines. There are differing interpretations as far as what costs are coded and labeled."
He added that the University uses a "vigorous" internal auditing service to ensure that the funds are being used appropriately, in addition to the OIG's routine audit, to address the complexity of the situation.
Michael Robinson, spokesperson for HHS, said the University and the department are working together to find a solution. When the report was released, it contained a six month deadline for a resolution. But because negotiations are already underway, Robinson added that the situation should be "wrapped up much sooner" in the next two months.
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