Audit of a small subgrant notes reporting flaws that lead to federal subpoenas from Defense, Health & Human Services, and the National Science Foundation.
What triggered the investigation wasn't a large grant or even a direct one. Yale, a $2.6 billion institution, had a $1.7 million subgrant for stem cell research from the University of Massachusetts Medical School (state institution, no Form 990). But subgrants using federal funds are audited, so the Department of Health & Human Services looked at Yale's books for a period of about eighteen months, covering total spending of about a half million dollars.
What they found (PDF 1.2Mb) was that about $151,000 of the spending was transferred from other grants or from general funds.
- In some cases, it was because the grant award was approved late (a common occurrence), but the documentation was missing that was required by the University's own procedure manual to verify that the transferred charges were appropriate to the grant.
- But in other cases, funds were transferred to spend down the subgrant award, which is not allowed. A footnote tells us that initially an email provided to the auditors had been altered to omit the explanation of why the transfer had occurred. Ouch.
Apparently Yale has been aware of inadequacies in its grant accounting. From their own press release on the government investigation: "Late last year, the University brought in the Huron Consulting Group, experts in the field, to accelerate its efforts to upgrade accounting procedures and ensure compliance with federal regulations."
Huron Consulting has a product for effort certification and reporting for large institutions. As a side note, Huron Consulting was started by a group that had formerly been employed by Arthur Andersen.
Stories about government grant accounting don't get a lot of attention from the mainstream media. I could find no coverage by either the Washington Post or the New York Times, not even a wire story. But there's a good chance that a lot of people at Yale will be making the acquaintance of a number of auditors in the upcoming months and years. All because of a few charges transferred between grants back in 2001.