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HHS asks Florida research university to return $6.5M in grants


By Joe Carlson
Posted: May 9, 2014 - 4:00 pm ET
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The University of South Florida, a major healthcare research center, has been asked to return more than $6 million in federal grants because of allegations in an audit that the school sometimes exercised poor oversight and misspent the money.

The Tampa-based university received $200 million in grants from the National Institutes of Health and HHS from 2009 to 2011. But a performance audit by HHS' Office of the Inspector General said about $6.5 million of that was for costs that were either impermissible, improperly documented, or not directly related to the grants that paid for them.

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“The university takes very seriously its obligation to charge only allowable costs to federal awards and respectfully, but strongly, disagrees that its oversight was wanting,” Rebecca Puig, assistant vice president for research and innovation at USF, wrote in response to the audit.

The performance audit was done because past reports by the OIG and the Florida auditor general have yielded other red flags. “We are concerned that the university's grant management is a high-risk area,” analysts with HHS' Office of the Inspector General wrote in the report published Friday (PDF).

University officials strongly disagreed with the OIG findings, saying that nearly all of the money flagged as misspent between 2009 and 2011 was in fact legitimate and supported by contracts with HHS and NIH. Further, the school rejected the auditors' characterizations about the university's oversight of grant funds.

Although the school may end up paying back some of the money, university officials expect the figure will be significantly reduced from the $6.5 million recommended by the OIG.

“While it is not unusual for large and successful national research universities to be audited and asked to return federal dollars at the end of the audit, USF respects and adheres to the great responsibility trusted in it to properly spend and manage public research dollars,” said Paul Sandberg, senior vice president for research and innovation, in an e-mail.

Numerous clinical trials are being run at the university, including a large study on diabetes that involves coordinating data and laboratory samples from more than 200 clinical sites. The exact nature of that study and others was excluded from the report.

The OIG reviewed $24.8 million in expenses and concluded $6.5 million was not spent according to federal rules. That included about 30% of the 112 paychecks that were reviewed, and about 36% of the nonpersonnel expense items.

Many of the OIG audit findings reflected a practice of charging the government the full cost for staff time and supplies that were actually allocated for various projects, not just the grant in question. The university also was accused of inflating expenses by classifying a subcontractor as a vendor, which allowed it to claim administrative costs that would not have been available under a subcontractor classification. Finally, the auditors cited several instances of grant charges that lacked documentation or didn't appear allowable for other reasons.

“These unallowable transactions occurred because the university did not always provide adequate oversight to ensure consistent compliance with federal regulations,” the OIG report concluded.

The university protested almost every finding and presented the OIG's office with additional paperwork to back up its claims. (Much of the supporting paperwork was not included in the report for proprietary reasons.)

For example, the administrative and clerical staff salaries were justified because the personnel were working on “technical or programmatic work” for data-intensive, multisite clinical trials, which qualifies their pay for grant coverage, Puig argued. The school also protested the OIG's interpretation of subcontractor classifications and documentation requirements.

“Because the university believes that most of the preliminarily questioned costs are allowable, it also disagrees with the draft audit report's observation that it was not adequately overseeing its” HHS-sponsored projects, Puig wrote, referencing a draft of the OIG audit because that's what she was responding to at the time.

University officials could not say Friday how much of the grant money will be repaid. The OIG's office cannot force the money to be returned, but can only make recommendations based on its audit findings.

Follow Joe Carlson on Twitter: @MHJCarlson


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