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1' %1-001Mnr 'T'1' %1-001MNr"- WMr!;MPV4qtfrnrWVytpp,n..""r,7.44Wx DrCUMENT RESUME ED 340 281 HE 025 131 TITLE Financial Responsibility at Universities. Hearings before the Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce, House of Representatives, One Hundred Second& Congress, First Session, on Indirect Cost Recovery Practices at U.S. Universities for Federal Research Grants and Contracts (March 13 and May 9, 1991). INSTITUTION Congress of the U.S., Washington, D.C. House Committee on Education and Labor. REPORT NO ISBN-0-16-036849-9 PUB DATE 9 May 91 NOTE 424p.; Serial No. 102-33. Attachments contain reduced size type. AVAILABLE FROMU.S. Government Printing Office, Superintendent of Documents, Congressional Sales Office, Washington, DC 20402. PUB TYPE Legal/Legislative/Regulatory Materials (090) EDRS PRICE MF01/PC17 Plus Postage. DESCRIPTORS *Biomedicine; *Compliance (Legal); Costs; Educational Finance; Federal Aid; *Federal Regulation; *Financial Audits; Hearings; Higher Education; Legal Responsibility; Program Costs; *Research IDENTIFIERS Congress 102nd; *Office of Naval Research; Reauthorization Legislation; *Stanford University CA ABSTRACT In connection with its jurisdiction over biomedical research and development at higher education institutions, the House Committee on Energy and Commerce's Subcommittee on Oversight and Investigations met twice to hear testimony on abuses in the indirect cost recovery practir.es at univirsities for Federal research grants and contracts. At the first hearing witnesses testified about the legitimacy and reasonableness of Stanford University's overhead charges and the adequacy of government oversight provided by the Office of Naval Research. The hearing revealed extensive abuses at the university and ineffective oversight from the Navy. Appearing were witnesses representing the Office of Naval Research, the General Accounting Office, Stanford University, and the Defense Contract Audit Agency. Two months later the committee met again to hear suggestions for changing the regulatory and staffing practices of audit agencies, and to hear about the status of audits initiated shortly after the first hearing at the 41 universities that the Office of Naval Research oversees. Appearing were witnesses representing the Department of Health and Human Services (HHS), the Office of Grant and Contract Financial Management, the Inspector General, Office of Naval Research, and the Defense Contract Audit Agency. Included are the prepared statements of the witnesses, an HHS report, "Federal Funding to Colleges and Universities in Support of Research" and various documents and letters from Stanford University. (JB) 111 " UI DEPARTMENT OP EDUCATION Office of Educational Research and Improvement EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC) OkThis document has been reproduced as received from the person or organization originating it 0 Minor changes have been made to imorove reproduction quality Points of view or opinions stated in this docu- mint do not necessarily repr.sont official OERI position or policy FINANCIAL RESPONSIBILITY AT UNIVERSITIES HEARINGS BEFORE THE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED SECOND CONGRESS FIRST SESSION ON INDIRECT COST RECOVERY PRACTICES AT U.S. UNIVERSITIES FOR FEDERAL RESEARCH GRANTS AND CONTRACN MARCH 13 AND MAY 9, 1991 Serial No. 102-33 Printed for the use of the Committee on Energy and Commerce U.S. GOVERNMENT PRINTING OFPWE 47-4952:-. WASHINGTON : 1991 For sale by the U.S. Government Printing Office Supetintemient of Documents. Congressional Sales Office. Washington. DC 20402 I SBN 0-16-036849-9 3 COMMITTEE ON ENERGY AND COMMERCE JOHN D. DINGELL, Michigan, Chairman JAMIE H. SCHEUER, New York NORMAN F. LENT, New York HENRY A. WAXMAN, California CARLOS J. MOORHEAD, California PHILIP R. SHARP, Indiana MATTHEW J. RINALDO, New Jersey EDWARD J. MARKEY, Massachusetts WILLIAM E. DANNEMEYER, California AL SWIFT, Washington DON RITTER, Pennsylvania CARDISS COLLINS, Illinois THOMAS J. BLILEY, JR., Virginia MIKE SYNAR, Oklahoma JACK FIELDS, Texas W.J. "BILLY" TAUZIN, Louisiana MICHAEL G. OXLEY, Ohio RON WYDEN, Oregon MICHAEL BILIRAKIS, Florida RALPH M. HALL, Texas DAN SCHAEFER, Colorado DENNIS E. ECKART, Ohio JOE BARTON, Texas BILL RICHARDSON, New Mexico SONNY CALLAHAN, Alabama JIM SLATTERY, Kansas ALEX McMILLAN, North Carolina GERRY SIKORSKI, Minneeota J. DENNIS HASTERT, Illinois JOHN BRYANT, Texas CLYDE C. HOLLOWAY, Louisiana RICK BOUCHER, Virginia FRED UPTON, Michigan JIM COOPER, Tennessee TERRY L. BRUCE, Illinois J. ROY ROWLAND, Georgia THOMAS J. MANTON, New York EDOLPHUS TOWNS, New York C. THOMAS McMILLEN, Maryland GERRY E. STUDDS, Massachusetts PETER H. KOSTMAYER, Pennsylvania RICHARD H. LEHMAN, California CLAUDE HARRIS, Alabama Joss S. ORLANDO, Chief of Staff JOHN M. CLOUGH, JR., Staff Director MARGARET A. DURBIN, Minority Chief COU /Sta ff Director SUBCOMMTITER ON OVERSIGHT AND INVESTIGA11ONS JOHN D.DINGELL, Michigan, Chairman J. ROY ROWLAND, Georgia THOMAS J. BLILEY, JR., Virginia RON WYDEN, Oregon NORMAN F. LENT, New York DENNIS E. ECKART, Ohio DAN SCHAEFER, Colorado JIM SLATTERY, Kansas FRED UPTON, Michigan GERRY SIKORSKI, Minnesom JOHN Blrz aNT, Texas REID P.F. &rutin, Staff Director/Chief Counsel STEM'S F. Siam Deputy Staff Director Them D.H. STOCKTON, Research Analyst BRUM F. CHAPIN, Special Assistant DRNNIS B. WHAION, Minority Counsel JOHN J. HASIBIL, Minority Counsel GI/ 4 ;oaf CONTENTS Pcire Hearings held on: March 13, 1991 1 May 9, 1991 281 Testimon,y of: Biddle, Paul L., Resident Representative, Office of Naval Research, Stan- ford University 100 Dolan, Thomas J. Jr., Director, University Business Affairs, Office of Naval Research, U.S. Navy 100 Eng, Doren, Evaluator-In-Charge, General Accourting Office 12 Fitzpatrick, James, counsel, Stanford University 138 Gaither, James C. president, Board of Trustees, Stanford University 178 Keevan, William T., managing director, Arthur Andersen & Co 166 Kennedy, Donald, president, Stanford University 138 Kusserow, Richard P., Inspector General, Department of Health and Human Services 290 Lloyd, Robert, Regional Audit Manager, Western Region, Defense Con- tract Audit Agency 65 Miller, Rear Adm. William C., Chief, Office of Naval Research, U.S. Na400, 388 Moley, Kevin E., Assistant Secretary for Management and Budget, De- partment of Health and Human Services 287 Newton, Fred J., Deputy Director, Defense Contract Audit Agency 65, 398 Ole, John M. Jr., Director, RCED, General Accounting Office 12 Riddle, Frank, controller, Stanford University 138 Roslewicz, Thomas D., Deputy Inspector General, Department of Health and Human Services 290 Simpson, Robin A., Director, Monterey Detachment, Office of Naval Re- search, U.S. Navy 100 Socolar, Milton J., Special Assistant to the Comptroller General, General Accounting Office 12 Sweet, Janet, assistant controller, Cost Policy and Recovery, Stanford University 183 Talesnik, Galy M., Director, Office of Grant and Contract Financial Man- agement, Department of Health and Human Services 287 Tueller, Arlin R., Deputy Regional Director, Defense Contract Audit Agency 65 MateriaF submitted for the record by: Department of Health and Human Services: Report entitled "Federal Funding to Colleges and Universities In Support of Research" 323 Stanford University: Various documents and letters requested by subcom- mittee at March 13, 1991 hearing 216 FINANCIAL RESPONSIBILITY AT UNIVERSITIES WEDNESDAY, MARCH 13, 1991 HOUSE OF REPRESENTATIVES, COMMTITEE ON ENERGY AND COMMERCE, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, Washington, DC. The subcommittee met, pursuant to notice, at 10 a.m., in room 2123, Rayburn House Office Building, Hon. John D. Dingell (chair- man) presiding. Mr. DINGELL. The Subcommittee on Oversight and Investigations will come to order. Under the Rules of the House of Representatives, the Subcom- mittee on Energy and Commerce has specific jurisdiction over bio- medical research and development. Tins includes research activi- ties at universities like Stanford. What we are going to hear today is a story of taxpayers' dollars going to bloated overhead rather than to scientific research. It is a story of excess and it is a story of arrogance. It is compounded regrettably by lax Government over- sight. The Government simply did not do its job. It also encouraged events which bring discredit upon many who under a different milieu might have performed better. The Chair wants to make it clear at the outset what it is that we focus on today and what are the purposes of the investigation. Today it will be the purpose of the committee to examine the al- lowability and reasonableness of Stanford's overhead charges to the Federal Government for scientific research. Today the subwmmit- tee will be examining the adequacy of Government oversight pro- vided by the Office of Naval Research, which has the responsibility of protecting the interest...4 of the taxpayers at Stanford University and at other colleges and universities around the country. At a time later we will also be inquiring into similar events at other col- leges and universities. In like fashion, we will be scrutinizing the behavior of the auditing functions and the auditing arms of the De- partment of Health and Human Services to ascertain what it is that they have been doing with regard to their responsibility over public moneys. The Chair wants it clear that the subcommittee is not examining Government research policy.
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