Breaking Down the Buddy System

Financial relations between the federal government and private universities operate on the age-old "buddy system." Down the road at M.I.T. where bespectacled scientists sit in cavernous laboratories and dream up new missile and radar systems, the Defense Department, not surprisingly, is in charge. Out in the Midwest, where soft-spoken graduate students plant hybrid crops and try to improve harvest yields, big brother is the Department of Agriculture. And here at Harvard, where the lion's share of federal funds is funnelled into medical research, people report to the Department of Health, Education and Welfare (HEW).

This year, more than $85 million will travel from Washington's offices to Cambridge's laboratories and libraries, Robert H. Scott, director of financial systems, reports. At the Medical Schol, officials say, 70 per cent of all research funds come from various federal agencies. "The National Institute of Health (NIH) is the lifeblood of the Medical School research effort," Elizabeth A. Picard, associate dean of the Medical faculty for financial affairs, says flatly. Federal funding has become the linchpin of academic research.

But money, as anyone who has tackled the piles of federal forms and waded through the swamp that is the Washington bureaucracy will tell you, does not come easy. To get it, you've got fill out forms. To keep it, you've got to fill out more forms. And once you think you're done with it, the feds are still just around the corner.

Up on Huntington Avenue, over at the School of Public Health (SPH), they've been learning the hard way. A couple of years ago, 10 men from the regional HEW office descended on the budget office--and didn't leave for 18 months. When they finally packed up their calculators and balance sheets, and issued the first part of their draft report, nobody offered to throw any going-away parties. In a document released last April, HEW charged the school with questionable expenditure of $2.5 million and challenged the school's techniques for recording more than $15 million in salaries and wages. And auditing was an exciting subject once again.

It wasn't the first time, of course, that the SPH has faced charges of misappropriation of funds. Way back in 1975, when one-time SPH faculty member Dr. Phin Cohen charged Harvard officials with actively misusing federal research funds--and then told the NIH about it--the battle began. Then in May 1976, an NIH audit concluded that the school's department of Nutrition had overcharged the federal government by $132,000 and the agency told Harvard to give it back. The University concurred with the findings and returned the money in September 1976--in an effort to put an end to the entire episode.

But it was too late. Cohen, who had lost his job as well as a portion of his federal grant, was not about to give up. He filed a lawsuit against the University and two SPH officials, demanding his reinstatement as an assistant professor of Nutrition and pointing the finger at Harvard's unbalanced books. When a Congressional subcommittee heard what Cohen had to say, Harvard was brought face to face with HEW. And HEW launched a massive investigatory audit of some $225 million in federal research grants given to various University faculties from 1974-77. So much for the buddy system.

In its latest draft audit report, HEW charges the SPH with mismanagement of almost half of the $37.1 million the school received in the three-year period under investigation. Throughout the text of the document, HEW officials charge Harvard with sloppy and insufficient record-keeping and faulty supervision of expenditures.

The first portion questions the use of some $2.5 million the SPH used to purchase equipment and maintain facilities. The second portion, as Scott explains, questions about $15 million distributed under the University's "salary certification system." "The payroll distribution system and related internal controls are not in compliance with federal regulations," the 60-page document charges. "The system that was used and currently in use does not provide reasonable assurance that direct costs for the personal services of professorial and other professional staff were either proper or reasonable."

The final draft of the document, which HEW officials originally promised for last December, has still not been released. Richard Ogden, assistant audit director in HEW's regional office, refuses to comment about the content of the agency's charges, saying only that the final report will be ready sometime this December. Federal officials are even more tight-lipped about the investigation.

Meanwhile, Harvard officials are waiting, gnashing their teeth and talking about the agency's failure to uncover the documents that will vindicate the University. Thomas O'Brien, vice-president for financial affairs, predicts that HEW will eventually only demand that the University return a few hundred thousand dollars due to insufficient documentation--in contrast to the $2.5 million the original audit asserted had been misused. Both O'Brien and other University officials say the agency derived the $2.5 million figure after dissecting only a small part of the total--and then extrapolating the results.

University officials are even angrier about the audit's armchair attitude towards the school's salary certification system. "Our partnership with the federal government has evolved to the point where it has become very difficult for universities to keep accurate track of funds," says Howard J. Levy, assistant dean for financial affairs at the SPH. "It's hard to put a time clock in the head of a professor and see when he was thinking about which federally-funded project he may be working on," he adds. Scott says the HEW assessment of the University's record-keeping for wages "seems a little unfair. I would not object as much if they told us to change it in the future," Scott insists, "but they're talking about a system used from July 1974 until 1977. Now is a wonderful time to tell us that they don't like it." Scott notes that not all professors and researchers are skilled in bookkeeping; "some professors keep great records but others don't. Some people check off their bank statements at the end of every month and some don't."

O'Brien says the agency has made "no attempt to arrive at a balanced judgement; what they look for--when they come in every three or five years--is insufficient documentation." Scott puts it more simply when he says, "Harvard manages its funds in a way that makes sense to Harvard. HEW has criticized us for not documenting our expenditures very well--but they did not find the right documents." Both are convinced that when the University is allowed to scrutinize the audit in detail, the vast majority of the discrepancies will be "negotiated away." Meanwhile, in the Office of Research Contracts on the third floor of Holyok Center, professors continue to apply for federal grants. Of the 100-odd pages in the handbook the Office gives to prospective grantees, a little less than half a page is devoted to discussing audits. Bu the end of the year--when the office sits down to revise the booklet--the section may be just a little longer.