MIT has admitted to overcharging the government over $700,000, and many other colleges have admitted similar improper billings. The Department of Health and Human Services (HHS) has found further significant overbillings by at least 12 colleges that have already admitted to inappropriate charges, according to one investigator who spoke on condition of anonymity.

Federal Action

The General Accounting Office (GAO) has wrapped up its inquiry at Stanford and is now conducting investigations at Harvard, MIT and the University of California at Berkeley. HHS is auditing over 20 schools and the Navy is performing audits at over 40 schools.

In addition, HHS has sent a letter to over 200 schools advising them of the indirect cost issue and of their responsibility to properly bill the government.

The White House's Office of Management and Budget (OMB), which sets the regulations for what can be charged as indirect costs, has proposed capping the rate of administrative indirect costs--one of several categories of indirect costs--at 26 percent of direct costs.

OMB will be drafting a new version of Circular A-21--the all-encompassing set of regulations defining appropriate indirect cost billing--that will attempt to further restrict overhead reimbursements in light of the findings of the GAO and HHS.

When the GAO has completed its inquiries into indirect costs, it will prepare a comprehensive report on its findings for the subcommittee, an investigator says.

Already, the inquiry into indirect costs has raised questions about research practices behind the walls of the Ivory Tower. Both the media and government officials have simplified the issue into a battle between the taxpayer-conscious government watchdogs and the spending-abusive administrators of research institutions.

But those watchdogs may have been sleeping on the job, allowing universities to indiscriminately

At Stanford, one of the federal inquiries was not into university finances at all, but rather into the practices of Stanford's regulatory agency, the Office of Naval Research. The subcommittee is also concerned about the practices of HHS, which oversees hundreds of schools.

And federal auditors have not regularly kept track of higher education accounts. For many schools, including Harvard, in-depth audits are few and far between.

The public eye, though, has turned to the spenders themselves, and the Ivory Tower is lined with red faces.

"There's a lot of people that are suspicious about where indirect costs go," says Lehman Professor of Microbiology and Molecular Genetics Bernard N. Fields. "That's not my belief."

"I think it has [tarnished our reputation], and I think it's unfortunate," Fields says.

"The economy is tough," he says. "People are out of work. I think this is a very vulnerable target."