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DCAA drops investigation into funds

By Eva Moy

The $22 million audit of MIT finances for fiscal year 1992 by the Defense Contracting Audit Agency, a department of the Pentagon, was temporarily halted last Friday. The audit, along with those of about a dozen other research universities, had previously been labeled a "criminal investigation" by the press, although this appears to be untrue.

The Boston branch of the DCAA withdrew the entire $22 million request in a letter sent to the local Office of Naval Research representative, according to James J. Culliton, MIT vice president for financial operations. The letter said that circumstances had changed since the audit began, including a $778,261 payment by MIT to the government and the creation of a $6 million trust fund for employee benefits, Culliton said.

The DCAA office in Washington did not return our telephone call, and members of the regional DCAA office could not comment on the audit.

The audits had been ordered by the House Oversight and Investigations Subcommittee, headed by Rep. John D. Dingell (D-Mich.), after the congressional subcommittee held a hearing on Stanford's use of government funds a year ago, according to Dennis B. Fitzgibbons, a spokesman for the subcommittee. The "committee is responsible for federal research money. . . . [It] always has interest in seeing that the taxpayers' money is properly spent," he said in a telephone interview yesterday.

MIT's role in upcoming

hearing still unclear

Audits for all of the schools involved will be presented at a subcommittee hearing on Jan. 29, according to Norman Hanson, public affairs officer for the Office of Naval Research, to which the DCAA submits its audits. The hearing had originally been scheduled for Jan. 30, he said.

"I have not received any formal notification of the withdrawal" of the DCAA's audit of MIT, Hanson said. He also said the "DCAA believes that some of the things in the audit should be revised. . . . What they'll do is issue a supplement to the audit."

Fitzgibbons also said the House subcommittee has not yet been informed of the audit's change in status. But in an interview on Friday, he said the subcommittee was "simply waiting for the facts." Fitzgibbons also had not been notified of the DCAA's decision.

Whether the audit of MIT will still be considered at the hearing is still unclear. Culliton said that even if the DCAA offers a revised 1992 audit, due process would prevent it from being presented without first allowing both MIT and other agencies the customary month to read and respond to it. The audit is "supposed to be confidential," Culliton said, adding that certain parts of the audit can be exposed prematurely through the Freedom of Information Act.

Other agencies may

audit MIT as well

In addition to the DCAA, the Department of Health and Human Services and the General Accounting Office are also expected to be at the hearing, Fitzgibbons said. The DCAA and HHS are both responsible for overseeing research contracts, he said. Schools with a higher proportion of funding from defense-related projects are under the DCAA, Fitzgibbons explained. In general, the GAO audits federal agencies, such as DCAA, he added.

The subcommittee may also choose to audit MIT's submitted 1990 budget, Culliton said. This is important because the figures presented by MIT in the proposed 1992 forward-pricing budget were based on figures from the 1990 budget, he added.

The HHS, which examines universities' reimbursements for travel, entertainment and similar items, may also audit MIT, according to The Boston Globe. Culliton said MIT had already repaid the government for inappropriate expenses uncovered by the DCAA audit as part of the $778,261. However, HHS may question other costs, which may include flowers and a trip to Barbados by two members of the Treasurer's Office which lacked prior approval for foreign travel, Culliton added.

The GAO declined to present its position on this matter, according to Laura Kopelson, a GAO spokesperson. However, she did say that "we have been asked by Dingell to look into the practice for reimbursing overhead . . . for the House Energy and Commerce Agency."

Charge of criminality

may be unsubstantiated

Despite reports in The Globe that several prestigious universities are under criminal investigation for the alleged misuse of government research funds, many other sources denied that criminal charges were involved.

Donald Mancuso, an assistant inspector general at the Pentagon, said the Naval Investigation Service conducts criminal inquiries for the Department of Defense and is looking into this case, according to The Globe.

But MIT officials said they were not aware of any official criminal investigations. "As far as I'm concerned, there's no criminality here. . . . It's an allegation that . . . will show no substance," Culliton said. He added that the DCAA can expect "full cooperation from MIT."

Hanson of the ONR Public Affairs Office said yesterday, "I do not know if they have a [criminal investigation] going."

Another representative from the NIS also could not confirm Mancuso's claim. "Our job would not be to determine the criminality" of a case, explained Lieutenant Commander Kevin M. Mukri, public affairs officer for the NIS. He added that their job is to determine whether allegations are factual or not and present their results through DoD channels.

Questions still expected

to be raised with re-audit

Other issues may still re-emerge in the DCAA's re-audit, Culliton said. He expects that the question of the percentage of recoverable library costs will be important in the new audit.

MIT had signed a Memorandum of Understanding with the government to set the cost recovery rate at 49 percent for a period of five years, ending in 1990, Culliton said. There had been a misunderstanding at the DCAA which resulted in an audit of MIT for overcharging the government, according to Culliton.

In that audit, the DCAA had proposed that MIT recover only 21.5 percent for FY 1992. However, Culliton explained that MIT had conducted standard population studies which confirmed the validity of the 49 percent billed to the government. These special studies are typically conducted every year or two, Culliton said. However, a misunderstanding had occurred because MIT thought it would not have to submit such studies during the period under a contractual agreement, he explained.

In addition, data in MIT's response to DCAA's audit for 1992 showed that MIT had charged percentages ranging from 43.2 percent to 56.5 percent in the past decades. Culliton did not think this would continue to be a point of contention after MIT and the DCAA look back at the records to find that the recovery rate was actually about the same when applying the correct formula. Culliton said, "We'll rest our case with ONR and [the Armed Forces Board of Appeals] if necessary."

Another study on library usage is being conducted now, with ONR and DCAA invited to participate, Culliton added.

Culliton also said the government should not retract past MOUs when evaluating the audits from 1986 to 1990. Out of the 10 MOUse that MIT has held with the government, eight have been disputed by the DCAA, Culliton said. "The MOUs that we entered into are contractual obligations. . . . Retroactively they should not be aggravated," Culliton added.