U.S. Questioning Millions in Stanford Research Bills : Inquiry: Probers say government was charged $2,000 a month for flowers. Other universities face investigation.

Stanford University has charged taxpayers $2,500 to refurbish a grand piano, $3,000 for a cedar-lined closet and $2,000 a month for flower arrangements at the official residence of the university’s president, according to congressional investigators.

The figures were discovered after federal auditors questioned millions of dollars that Stanford had billed the government for government-backed research in recent years.

The Office of Naval Research, which monitors payments to Stanford for all government research, said Thursday that a five-person team will be sent to Palo Alto to investigate allegations concerning the billing practices.

Last week, faced with questions from the congressional investigators, Stanford disclosed that the university had repaid $184,286 that it had erroneously charged the government for depreciation on a 72-foot yacht, complete with Jacuzzi, as well as on other equipment.

Congressional investigators now are sifting through thousands of vouchers at the university in preparation for a hearing early next year on the manner in which Stanford has billed the government for overhead costs associated with government research.

“We have recently discovered a number of charges that have been absorbed by the government that neither I nor the taxpayers financing these costs would consider reasonable or proper,” Rep. John D. Dingell (D-Mich.) said in a letter asking federal auditors to step up their examination of research overhead costs at Stanford.

Dingell, chairman of the House Energy and Commerce Committee, compared the inquiry to the early stages of an investigation of billing practices in the defense industry. He indicated that similar questions may exist at other universities, and investigators said that Stanford is only the first of several schools that will come under scrutiny.

Larry Horton, Stanford’s associate vice president for public affairs, said that the university has followed proper guidelines in billing the government and provided auditors with what it believes are justifications for the figures challenged in audits. Negotiations over the charges are under way, he said.

Horton said that Hoover House, the residence of university President Donald Kennedy, is owned by the school and used regularly for campus activities. He said that some costs associated with it can properly be allocated to research overhead. He said he is aware that costs associated with the piano, closet and flowers are under review but that no judgment has been made that they are unacceptable.

However, Horton acknowledged that the depreciation costs associated with the yacht were mistakenly passed on to the government and were repaid as soon as they were discovered. He said that the repayment does not actually involve returning money but rather that it offset future costs.

The university has hired two Washington law firms to represent it in dealings with Dingell’s subcommittee on oversight and investigations, which is leading the inquiry.

The investigation was triggered by unrest among the Stanford faculty over the high overhead rate that the university charges the government for research and complaints from a government auditor. The professors were concerned that the rate might price them out of the market for some government projects.

The rate is meant to cover indirect costs to the university associated with research, such as buildings, utilities, administration and libraries. Universities also add such items as tennis courts and faculty discounts for football tickets to the rate, contending that such costs are associated with persuading top people to work for them.

Stanford charges the government 74 cents for every dollar the government spends on research at the school to cover those indirect costs, one of the highest rates in the nation. That means that the government must pay Stanford $1.74 million for a $1-million research project. At Yale, the rate is 68% and at MIT it is 62%.

In fiscal 1989, Stanford was paid $241 million for government research, including overhead.

Investigators for Dingell and the General Accounting Office, an investigative arm of Congress, said they suspect that Stanford and other universities shift as much of their operating burden as possible to the government.

For 1991, Stanford is seeking a rate of 78%. However, a federal audit completed in September and obtained by The Times said that only 61% appeared justified. A decrease in the rate would cost Stanford millions of dollars.

Frank Riddle, Stanford’s comptroller, said auditors have received additional documentation and he expects the full rate request to be approved.

Auditors have also raised questions in at least two recent audits about millions of dollars in library overhead costs that the university has billed to the government. For instance, the auditors have questioned $2.3 million in such costs that Stanford says should be paid by the government because it represented space and material used for research. The auditors have challenged the way the school calculates those costs, and that matter also is being negotiated.

The yacht Victoria was donated to the school’s sailing program in December, 1987, and included in athletic department equipment. Depreciation costs on the equipment, including at least eight other boats and a prefabricated building, were charged to the government as part of overhead costs.