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MIT to pay back government $731,000

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By Katherine Shim

MIT announced Wednesday it will pay back the federal government $731,000 for money "inappropriately" claimed as indirect costs. MIT is currently under investigation by the Subcommittee on Oversight and Investigations of the US House Committee on Energy and Commerce, for incorrectly charging the government under indirect cost write-offs.

The announcement comes in response to an April 8 letter from

Rep. John D. Dingell (D-MI) requesting MIT to review its indirect cost records for fiscal years 1986 to 1990.

MIT made its announcement at a hearing of the Science, Space and Technology Committee of the House of Representatives.

The $731,000 figure includes costs for receptions at the president's house, an MIT Corporation party and a trip to Barbados. Also included is $27,317 claimed by the Whitehead Institute to cover legal expenses relating to charges of scientific fraud for a research paper signed by

former Whitehead Director David M. Baltimore '61.

Pending ongoing reviews of indirect cost records, MIT may find that it owes still more money to the federal government, according to James J. Culliton, vice president for financial operations. "We're still in negotiations with the DCAA [Defense Contract Audit Agency], and we're looking into the mechanics of applying our standard auditing process [to other areas]. Given this, the number to be withdrawn is sure to increase," he said.

Government charged

for food and flowers

In an April 8 letter, Dingell requested that MIT begin a review of its overhead accounts and identify items that were mischarged to the government. As a result of this review, MIT found that it overcharged the government $731,000. This figure includes money spent for catering, food, flowers and alcohol at receptions at the president's house, amounting to $13,600. Also included was $13,751 for an MIT Corporation party and $1,535 for a trip to Barbados.

The $731,000 figure also covers the $27,317 the Whitehead Institute paid to the Washington-based law firm of Kirkpatrick and Lockhart. Lawyers from this firm assisted three MIT officials in testifying before the House Subcommittee on Oversight and Investigations in 1988 and 1989 on questions of scientific fraud for a paper published in the journal Cell by then MIT researcher Thereza Imanishi-Kari and signed by Baltimore.

Last week, Whitehead agreed to repay the $68,966 inappropriately charged to the government for lawyers fees.

Culliton said that some of the funds that were improperly charged to the federal government were simple errors that "slipped through." The remaining expenses were for items that had previously been allowable under the category "departmental administration." Under new definitions, these items are no longer allowable. MIT has agreed to pay for these items retroactively.

MIT agreed to make these payments for a number of reasons, including "the desire to avoid any risk of continued damage to the long-standing government-university partnership so vital to national research," Culliton said in a statement.

"We have the responsibility to American taxpayers, including ourselves, our own faculty and employees, to make sure that scientific research in the non-profit university environment is being conducted economically," President Charles M. Vest said in a statement.

The $731,000 figure makes up less that 1 percent of total overhead costs charged to the government, amounting to $482 million.

In 1990, the Subcommittee on Oversight and Investigations, which Dingell chairs, began reviewing indirect cost practices at US universities. The committee began a formal review of MIT on April 17. An in-depth review of these practices has already been conducted at Stanford University and is ongoing at other universities including Harvard Medical School.

Indirect costs are defined as "charges not easily allocated to each research project, such as costs for utilities and space, academic administration, [and] general administrative costs," Culliton said. This covers costs incurred from building use, equipment depreciation and general administration, he said.

MIT maintains that it "has an understanding with the government" to voluntarily not take advantage of the indirect cost policy inappropriately, resulting in savings for the government of approximately $8 million over five fiscal years, Culliton said. For example, MIT voluntarily set lower caps for "departmental administration" costs than the cap set by the government, Culliton said, amounting to savings for the government of $2 million in 1988.

"Although MIT research policy is to assure full cost recovery for properly allocable expense, we have consistently not established or used procedures that would take advantage of . . . government accounting rules," Culliton said.

To prevent future inappropriate indirect cost charges, MIT will give all Institute account supervisors an "update on the process for identifying and screening unallowable costs as now defined," Culliton said. The MIT Audit Divison will also revise "its audit procedures to include a screening process for unallowable costs" and run educational programs on "screening methodology" for its employees, Culliton said.