NIH, which provides the bulk of the Medical School's research dollars, awarded the school $30 million dollars in grants over the fiscal year, according to Moore.

Those monies were provided to the Medical School under the previous HHS agreement of 77 percent, which expired June 30. The provisional rate of 88 percent will stand until a new agreement is drawn up.

But two problems confront the Medical School in its negotiations for an increase in the indirect cost rate.

The investigation, which will already probably delay a new contract with HHS, could have a significant negative impact on any agreement if it uncovers wrongdoing.

If the probe concludes that the Medical School has had too high an indirect cost rate in the past, then HHS will be less likely to increase the school's rate.

In addition, the school has requested an unusually high indirect cost increase--a 25-point jump to 102 percent--which would give the University more than one dollar in indirect cost reimbursement for every dollar in Medical School research grants.

The school's proposed rate is not likely to be accepted by HHS and may be significantly reduced, according to an informed source.

In addition, if the new contract results in a lower indirect cost than the provisional agreement of 88 percent, then the University will have to pay back the excess received under the provisional cap, the source said