U., gov't sign indirect cost contract Fri.

Agreement is for 62.5 percent The University signed an agreement with a federal agency Friday that reduces the rate at which the University will recover money from the government to cover administrative costs associated with research. But administrators said the actual amount of money the University will receive for research overhead will increase next year because the amount of research funding to the University has increased. The University and the U.S. Department of Health and Human Services agreed that the federal government will reimburse the University 62.5 percent of research grants beginning in July. This means that for every $1000 the University receives in federal research grants, the U.S. government will pay an additional $625 to cover the administrative costs. The money will be used to cover administrative and maintenance costs associated with research, such as libraries, assistants and utilities. The new rate will be valid for two years, at which time it will be increased to 63.5 percent for an additional year. Currently, the University's indirect overhead rate is 65 percent. Administrators said the rate, which the University has been negotiating since November, was fair to both the University and the government. "It really represents an accurate and reasonable rate," Vice President for Finance Selimo Rael said Friday. "We considered it very carefully." Comptroller Alfred Beers added that it is particularly important that the contract was negotiated for multiple years, allowing the Univeristy to project how much money it will recover over the next three years. "It is good to have that part of the budget stabilized," Beers said Friday. "It allows us to project how much money we will receive." In the current year, Rael said the University garnered about $58 million through the indirect cost recovery contract and projects to recover approximately $60 million for the upcoming year. The University's indirect cost recovery program came under fire last year when a U.S. Congressional subcommittee discovered that it's rate was too high because it contained "questionable costs". These costs included expenditures for alumni relations, fundraising activities, entertainment, chaplain activities and public relations. Government officials have not claimed that the University misspent any money recovered as indirect research costs. They have simply contended that the amount of money the University received was too high because it was based on faulty figures. Ultimately, the University repaid HHS over $930,000 in improper overhead charges. The reimbursement amounted to less than one-half of one percent of the $219 million in federal research overhead payments the University received for the last five years. The rate was not renegotiated due to the national controversy, University officials said, but had been scheduled to be renegotiated years ago in accordance with the current contract which expires in July.

Please note All comments are eligible for publication in The Daily Pennsylvanian.