U. to sign government agreement to set research rates

University administrators said they hope to sign an agreement with a federal agency within a month to determine how much money the University will receive from the federal government for the administrative costs associated with research. The University is currently negotiating with the U.S. Department of Health and Human Services to settle on an indirect research overhead rate, which amounts to millions of dollars for the University every year. University Vice President for Finance Selimo Rael said Friday that he does not expect the new rate, which will take effect in July, to vary significantly from the current 65 percent, which expires on June 30. "We are in negotiations with Health and Human Services negotiators and we are very close to resolving our rate, but have not yet completed that process," Rael said. "I don't expect substantial change from our current rate." The University's current rate was determined through HHS negotiations in 1987. Last year, a U.S. Congressional subcommittee revealed the University's overhead rate was too high because it included "questionable costs." These costs included expenditures for alumni relations, fundraising activities, entertainment, chaplain activities and public relations. The government has not claimed that the University misspent any money recovered as indirect research costs. They have simply claimed that the amount the University received was too high because it was based on faulty figures. The government has not audited the University's spending between 1988 and 1992, relying instead on the rate proposal using 1987 figures. How the University actually spent the federal overhead money from '88 to '92 was outside the scope of HHS. 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. But Rael said that HHS did not go into the current rate negotiations looking to "punish" the University for past misspending. It is unclear for how many years the new rate will apply. Since fiscal year 1988 the University has charged the government a 65 percent overhead rate on every research grant to cover indirect costs. This means that for every $100 a researcher receives, the University receives an additional $65 for the use of buildings, maintaining research projects and the administrative costs associated with research projects. Rael said in November that the University would seek a new overall rate of 65.9 percent. The Philadelphia Inquirer incorrectly reported Thursday that the University will receive $10 million less from HHS for past overbilling. The writer said Friday she had used a federal document titled "Recap of DCA Negotiations of 14 -- SCRUB -- Schools," as her source. But the document does not say that the University will receive $10 million less this year. Rather, it states that in 1987 the University tried to negotiate for a 77.7 percent rate with the government and settled at the current 65 percent -- resulting in a savings of $10 million for the federal government. "That [Inquirer] article is incorrect," Rael said. "The University has not been reduced by ten million by HHS. That is simply not correct." Rael, who was not at the University in 1987, also said Friday that he is not aware that the University ever proposed a 77.7 percent rate. HHS Spokesperson John Gibbons confirmed Friday that the federal document used by the Inquirer does not indicate that the University will receive less money from HHS. He also said that 77.7 percent was the rate initially proposed by the University in 1987.

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