Stanford Unveils Financial Reforms : Research: The changes are aimed at eliminating questionable billing of taxpayers for some indirect costs of work performed by the university.

Stanford University announced a package of in-house financial reforms Monday, seeking to shed its image as an abuser of federal research funds.

“The partnership between universities and the federal government must be built on mutual trust. Stanford is determined to re-establish this trust,” declared the university’s report responding to the research spending controversy that has rattled the Northern California campus since last year.

The changes are to include tighter accounting methods, a new code of conduct for university employees and the establishment of a campus office to deal with the sticky questions of billing the government for the indirect costs of research. Some reforms are to begin on Sept. 1 and others are expected to take up to two years to implement, said Peter Van Etten, Stanford’s chief financial officer.

Van Etten and other Stanford officials continue to contest allegations from government investigators that the school may have overcharged taxpayers as much as $200 million for research overhead during the 1980s. Stanford last week refunded to the government $320,508 that the school received mainly for housing expenses and club dues for campus leaders, bringing the total in givebacks so far to $1.35 million. Audits by both the government and Stanford are continuing.

Still, Stanford clearly is trying to mollify congressmen and alumni donors upset by reports that the university partly billed the government for such luxuries as a yacht and antiques.

Response to the announcement was mixed.

Rear Adm. William C. Miller, the chief of naval research, whose agency monitors federal research funds at Stanford, said he was “encouraged” by the school’s plan and hopes “Stanford’s management remains steadfast in their commitment to weed out inappropriate charges to the government.” In his prepared statement, Miller added: “The planning looks good, but we cannot declare ‘victory’ until the plan is fully implemented and the results can be measured.”

In the fiscal year ending last Aug. 31, Stanford received $260 million in federal research funds, including $84 million for such indirect costs as maintenance, utilities, libraries and office work. But in April, Miller ordered a sharp drop in Stanford’s reimbursement rate, a move expected to cost the university about $23 million this year. Stanford’s rate had been among the highest in the nation and the school hopes to persuade Miller to reverse his decision.

U.S. Rep. John. D. Dingell (D-Mich.), chairman of the House Committee on Energy and Commerce and its investigatory subcommittee that grilled Stanford officials on the billings in March, said the report appeared “to be sincere.” But he remained skeptical, saying Stanford did not offer a good enough explanation of what went wrong. “How can you prescribe cures if you have not identified the disease?” Dingell asked.

Stanford hired the Arthur Andersen & Co. accounting firm to review its handling of research funds. The firm’s report recommend 35 changes--all approved by the school’s Board of Trustees and expected to cost several million dollars, officials said.

Among the promised changes, according to the Andersen report: tougher reviews of federal grants and better procedures to screen out billings forbidden by the government; mandatory training for faculty and administrators whose work is related to government contracts and grants; development of a written code of ethics and conduct for Stanford employees; improved physical inventory methods, and establishment of the position of a campus officer “to help facilitate compliance by all Stanford employees with applicable laws and regulations.”

Stanford President Donald Kennedy appointed a panel of outside experts to review billing policies. Its members included Joseph E. Connor, chairman of Price Waterhouse World Firm; Father Timothy S. Healy, New York Public Library president; Admiral Bobby R. Inman, former director of the National Security Agency, and Paul O’Neill, chairman and chief executive officer of Alcoa.

That committee approved the reforms but said it was concerned that scientific work at Stanford may suffer because of preoccupation with accounting procedures. The situation at Stanford triggered investigations at other campuses across the country and refunds from such schools as Harvard and Caltech. Also, in response, the federal government has tightened rules on billings for housing and entertainment.

In a written introduction to the reform plan, Stanford said that government investigations produced “evidence of error and inappropriate costs in Stanford’s submissions for reimbursement.” But the document looks mainly forward, not backward.

In a written statement, Kennedy said: “We are confident that the fundamental changes we will be implementing will move us to a new position of stronger, more effective accountability for public funds.” Some critics have called for Kennedy’s resignation because of his handling of the research spending controversy.