The earthquake that rocked San Francisco almost two years ago did $160 million worth of damage to nearby Stanford University. This week tremors of a different sort threaten to rattle the elite Palo Alto-based institution -- and dent its coffers by as much as $200 million. On Wednesday, Michigan Democrat John Dingell, chairman of a House investigative subcommittee, is to hold a daylong hearing on allegations that throughout the 1980s, Stanford routinely overcharged taxpayers for millions of dollars in research-related expenses.
No fewer than four federal agencies are looking into the creative- bookkeeping practices that enabled the university to bill Uncle Sam for depreciation on a 72-ft. yacht; faculty discounts on tickets to athletic events; and a percentage of the cost of flowers, bedsheets, tablecloths and antiques for the president's house. In January, Stanford agreed to refund $500,000 in government money used to maintain three university-owned houses, including the president's, and to pay back more than $180,000 on the yacht, a charge that the school said was an accounting error. But Dingell, who has hyperbolically likened Stanford's deeds to the defense-contractor scandals of the 1980s, wants to use the transgressions to stir debate on the lack of accountability in the government-university relationship. "At a time when U.S. scientific efforts are falling behind," says Dingell, "to have research money spent frivolously is simply not acceptable."
Stanford's predicament raises troubling questions about how the government and universities spend taxpayer dollars intended for scientific research. This week's hearing is expected to focus not only on Stanford's questionable accounting practices but also on the agency that monitored the school's federal contracts, the Defense Department's Office of Naval Research. That group failed to audit thoroughly Stanford's overhead costs for almost a ) decade. Says Middlebury College President Timothy Light of the current system for underwriting university-based research: "It's a ghastly mess."
At the center of the maelstrom is a set of arcane rules, installed gradually after World War II, that turned the Federal Government into America's primary sponsor of university research. Under these regulations, the government foots the bill for research and many of the overhead costs of doing research. These so-called indirect costs, which are not attached to any single project, include university-wide expenses like administration, libraries, roads, utilities and building maintenance. Every university charges the government a different rate for overhead, based on such considerations as geography, which determines a school's energy and wage costs, and the size and age of its facilities. The rates are set during periodic haggling sessions with one of three U.S. agencies: the departments of Defense, Energy, or Health and Human Services.