University Expects Settlement In Federal Audit Controversy

Harvard will seen settle the federal government's claim that the University improperly spent millions of dollars in research grants between 1975 and 1978, officials predicted yesterday.

The government's case against the University stems from the Department of Health and Human Services' (HHS) 1981 and 1982 audits of the School of Public Health and the Medical School, which say that the institutions must repay $3.9 million in grants.

Officials declined to say how much of the disputed $3.9 million Harvard expects to repay in the eventual settlement, and added that the University may still appeal the final figure reached by the government.

HHS officials could not be reached for comment yesterday.

"We've been negotiating quite heavily this summer," said Financial Vice President Thomas O'Brien, who has visited Washington three times to meet with officials of the HHS Audit Resolution division.

Simone A. Reagor, associate director for research administration and another Harvard negotiator, characterized the talks as "long and expensive," adding that negotiation helps clarify the matter for both sides.

Reagor will meet with HHS officials later this week to receive a response to Harvard's most recent series of proposals.

Of the $3.9 million sought by the HHS audits, $2.2 million concerns a 1981 audit of the School of Public Health, while $2.7 million is connected to the highly publicized investigation of the Medical School which the government released last October.

Most of the improprieties alleged by HHS involve the Medical School's practice of spreading government funds among grants attached to the same professor or research. Harvard--with the support of a coalition of universities across the country--claims that such reshuffling of funds is a common and necessary practice in the academic world.

"When you've got numbers that large and issues that complex, there's a lot of room for interpretation," O'Brien said of the government's method of suditing universities.

"My own time is spent on the larger issue" of government-university relations, O'Brien said, adding that Reagor and a large staff have worked for several months to uncover contradictions and new evidence in the audits of Harvard.

O'Brien is a member of the Board of the Council on Government Research, a group of 126 universities formed to study the problem of research cost accounting.

An outside audit in 1981 found the Medical School's cost accounting to conform very closely with federal standards.