Recent Federal Investigations

“FALSE CLAIMS ACT Settlements, Audits, and Enforcement Actions Involving Federal Research”, Hogan Lovells, LLP

Johns Hopkins University (JHU)

Date: February 2004

Johns Hopkins Settles Charges

Funding Source: Department of Health and Human Services, NIH

Description: Whistleblower brought charges under the False Claims Act that JHU had knowingly overcharged the government by overstating the amount of time researchers worked on federal research projects and in at least one case charging for more than 100% of an individual’s salary. NIH found that JHU failed to maintain adequate compliance procedures to reconcile proposed and actual effort or charge correct fringe benefit amounts, and found that documents relied on when submitting claims were not reliable.

Compliance Issues: Effort reporting. Payroll distribution

Settlement/Enforcement Actions: JHU paid $2.6 million to government. JHU agreed to investigate and identify any other unallowable costs already submitted and make appropriate adjustments with federal agencies

Dartmouth College

Date: September 2005

Dartmouth Investigation

Funding Source: Department of Health and Human Services, NIH

Description: OIG audit reported that Dartmouth had overcharged an NIH grant by $37,780 for salary charged for effort not related to the grant. The OIG found that Dartmouth did not have adequate systems in place for identifying actual activities, adjusting for changes to planned activities, and accurately computing payroll distribution charges. The OIG also found that Dartmouth had inadequate procedures to account for grant application activity (100% of researchers’ time was charged to grants during a period in which they submitted many grant applications); to monitor subrecipient costs; and that it had not complied with HHS conditions when revising its payroll distribution system.

Compliance Issues: Effort reporting, Payroll distribution systems, Monitoring costs and activities of subrecipients

Settlement/Enforcement Actions: Dartmouth disputed the OIG’s audit findings, admitting only $1,512 in salary overcharges due to the miscalculation of the NIH salary cap. Dartmouth maintained that the researchers’ effort spent on grant applications was insignificant, was supported by other sources, or involved sending in Progress Reports for NIH grants, a legitimate grant activity. Dartmouth also asserted that the PI was relieved from administrative duties during the time period in which 100% of his effort was allocated to federal grants. In its response, the OIG continued to fault Dartmouth for not clearly instructing its faculty members on how to account for grant application activity.

Yale University

Date: December 2008

Funding Source: Department of Health and Human Services, NIH Department of Defense National Science Foundation Department of Energy National Aeronautics and Space Administration (NASA) Several other federal agencies.

Description: Yale cooperated with federal authorities in a broad, multi-year investigation of federal research grant accounting going back to 1999. Authorities alleged that Yale mischarged federal grants through improper cost transfers designed to “spend down” grant funds, and through inaccurate and overstated effort reports that resulted in salary overcharges to federal awards. For example, the government alleged that Yale researchers submitted effort reports for summer salary that wrongfully charged 100 percent of their summer effort to federal grants, when researchers expended significant effort on other work. Yale acknowledged that charging errors occurred, but Yale disagreed with the government on both the nature and extent of the errors.

Compliance Issues: Cost transfers. Effort reporting.

Settlement/Enforcement Actions: $7.6 million paid to the government. Yale significantly strengthened and improved it research compliance administration and infrastructure, which included several upgrades to its cost accounting and effort reporting system, and the issuance of revised and updated policies and procedures related to federally sponsored research.