Audit Finds UC Billed Government for Questionable Items

The University of California charged the federal government for entertainment, flowers and chartered airplane travel as part of reimbursement for research costs, an internal UC audit has found. To preclude such questionable billings in the future, officials said UC is changing its accounting procedures.

The overall value of such possibly controversial UC billings is not known because the review examined only a random sample, UC auditors stated. But university auditors insist the total would be very small compared to the $850 million in federal research funds UC received last year mainly for medicine, science and engineering.

Still, UC clearly wants to avoid the congressional criticism that engulfed Stanford University this year after an investigation found that taxpayers partly paid for a yacht, antiques and parties at Stanford. The bad publicity led to Stanford President Donald Kennedy’s announcement in July that he would resign next year. Universities nationwide are scouring ledgers to comply with tough new government rules instituted as a result of Stanford’s problems.

The changes in UC accounting “will help us continue . . . to respond fully to both the letter and the spirit of new federal regulations and to the issues recently raised by the Congress,” UC President David P. Gardner said in an Oct. 30 letter to UC administrators. The issue is scheduled for discussion at the UC Board of Regents meeting in Berkeley on Thursday and Friday.

The UC audit found that Gardner’s office billed the government for such items as automobile expenses, gifts of flowers, travel allowance for executives and their associates, entertainment, public relations, first-class travel to commemorative events and the use of chartered aircraft. UC auditor Robert T. Tuffnell said some of those bills are inappropriate, while others “require analysis to determine allowability” under federal rules.

The new federal regulations on research forbid universities from charging entertainment and housing expenses to the government and sharply limit administrative costs that can be passed on. UC officials contend their own internal rules will be even more restrictive.

For example, Gardner’s office and those of the nine UC campus chancellors will be allowed to bill the federal government only for research-related salaries. Costs of working lunches and travel to conferences linked to research are “not going to be included from now on,” said Rick Malespina, a UC spokesman. In addition, officials will require better identification of expenditures.

UC campuses negotiate separately with the U.S. Department of Health and Human Services over reimbursement rates for such indirect costs of research as building maintenance, library services and administration. The UC campus average is 46.3%, meaning the average campus receives an additional $463 for every $1,000 granted for pure research costs. The national average for public institutions is 52%.

Tuffnell, the UC auditor, said he does not expect the government to seek a refund based on the UC report. HHS officials could not be reached for comment Monday because of the Veterans Day holiday.

The task force appointed by Gardner found that UC’s federal billing policies are generally good despite “some transaction errors.”

The UC audit sampled 150 billings from Gardner’s office out of a possible 64,000 transactions on file for 1989-90. Tuffnell said UC will not attempt to review the rest because it would not be cost-effective and “is extremely unlikely” to affect reimbursement rates. Besides, the audit reportedly found errors in UC’s favor, he said.