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Auditors call for $22 million rebate

By Eva Moy

A government agency has recommended that MIT withdraw $22 million billed to the government for research-related expenses. The Defense Contract Audit Agency has focused on about a dozen schools, including Stanford University and the California Institute of Technology.

MIT Vice President for Financial Operations James J. Culliton explained that most of the disputed amount stems from disagreements and changes in policy rather than erroneous or improper accounting.

Kenneth D. Campbell, director of the MIT News Office, explained that every year the DCAA advises the Office of Naval Research concerning universities' proposed requests for federal funding. Its recommendations and the universities' responses are given to the federal agencies which provide the funding. The ONR makes the final funding decisions, Campbell said.

MIT is challenging the DCAA's recommendations for the fiscal year 1992 budget in the areas of allowable indirect costs, or overhead, and employee benefits, Culliton said. These disputes will be discussed at a congressional hearing on Jan. 30, according to The Boston Globe.

Overhead includes building use, equipment depreciation, operations and maintenance, departmental and general administration and partial maintenance of libraries for research purposes, according to the MIT News Office.

Only library and administration costs are disputed, according to Culliton. Currently, MIT bills the government 49 percent of its library costs as research-related; the DCAA wants to reduce this amount to about 21.5 percent for FY 92, which would cost MIT approximately $3.4 million.

Also in question is whether off-campus administrative costs, such as those associated with Lincoln Laboratory, can be included as indirect costs. These costs come to about $8 million, Culliton said.

Culliton believes the real issue is government changes in the criteria it uses to determine costs. The government had signed Memoranda of Understanding with universities, under which it agreed to determine budgets in certain ways, Culliton said. He asserts that the government is now trying to rescind a binding, signed agreement and may also try to collect funds which would have been due in the past had these MOU had not existed.

If the ONR decides to accept DCAA's recommendations, MIT will challenge their decision at the judicial level of the Armed Forces Board of Appeals, Culliton said.

RA tuitions also in dispute

MIT also disagrees with the DCAA's recommendations to distribute the costs of research assistants' tuition to individual projects instead of grouping them together with the salaries of the entire institute, Campbell said.

This move would in fact save the Institute about $10 million this fiscal year, shifting this cost to the government, Culliton said.

The current system allows individual projects to hire more research assistants, since their tuitions are not paid out of the project's budget. If RAs' tuitions were added to the cost of specific projects, they could not afford to hire as many RAs, Campbell said. The change would leave MIT less competitive with other research universities, Campbell said.

"The result of the indirect method has been a significant increase in a key measure of MIT's productivity -- the number of doctoral students graduating," Culliton said in an article released by the News Office.

Culliton says $11 million

can be reconciled

About half of the $22 million should not be in question, Culliton said. MIT received about $4 million that it did not spend and thus will not be billed to the government. Another $6 million, set aside for post-retirement medical costs, will be removed from the $22 million as soon as a Voluntary Employees' Beneficiary Association is set up, probably by the end of the year, Culliton said. Another $1.1 million includes accounting errors made during the past five years, in addition to errors in projections for FY 91 and FY 92, Culliton said. MIT has already paid the government $778,000 for its overcharges over the past five years.

"To put it another way, our accounting for indirect costs for those five years is around 99 and 84/100 percent accurate. That does not excuse the errors that were made; it simply puts them in some perspective," Culliton said in the News Office release.