Audit Fraud

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Audit/Fraud/False Claims Act

The below article from the June 2005 Federal Grants News for Colleges and Universities (published by the NCURA and NCABO) is reported in its entirety.

"MAYO FOUNDATION SETTLES ALLEGATIONS, PAYS $6.5 MILLION TO GOVERNMENT

On Thursday May 26, the U.S. Department of Justice announced that the Mayo Foundation, parent company of the Mayo Clinic, had paid $6.5 million to the Federal government to settle allegations that it had misspent millions of dollars in Federal research grants over more than a decade. The qui tam lawsuit was filed by a former Mayo Clinic employee under the False Claims Act.

According to the court filings, the allegations against the Mayo Clinic involved the mischarging of direct costs between Federally funded research grants over the period 1993-2002. The compliant stated" Mayo has routinely, knowingly, and falsely mischarged direct costs between government-funded research grants and grant projects by misallocating expenses, including salaries and benefits, supplies and services, and even patient care costs to unrelated grant projects and cost objectives for which such mischarged costs provided no identifiable benefit."

The complaint alleges further that these cost transfers occurred in order to shift expenses from overspent grants to underspent grants, and that this involved retroactive alteration of previously certified effort and financial status reports.

Mayo Clinic officials, in a brief statement, maintained that the inquiry reflected a difference of opinion over bookkeeping procedures, specifically how the Mayo Clinic internally tracks its research expenses. They pointed out the, "No money is missing, and no false claims for any payments were submitted to the government." However, Federal prosecutors say their three-year investigation suggested otherwise. "We strongly view this as a fraud case," said Robyn Millenacker, an assistant U.S. Attorney in Minneapolis. "It's not a case about simple mistakes. We don't get $6.5 million settlements for clerical errors."

The Mayo Clinic has since changed its procedures to better comply with Federal rules. According to clinic officials, they agreed to the settlement to avoid a drawn-out investigation and further legal costs.

It is worth noting that one of the pilot audits in the HHS Inspector General's audit plan is a review of cost transfers, and cost transfer are also one of the three high priority issues identified by the IG in its proposed compliance program guidance.

A copy of the compliant and the press release is posted at http://postbulletin.typepad.com/honk/2005/06/us_vs_mayo_foun.html ."

As administrators we have an obligation to insure that sponsor funding is spent in accordance with the terms and conditions of the sponsor. This can be difficult if the project director or principal investigator (PD/PI) has a different perspective or set of priorities that appears to conflict. Please keep in mind that we all work for Rutgers and that we can not afford the Mayo Clinic kind of settlement or bad press. We only need to look in the local papers at our neighbor, the UMDNJ, to see what happens when policies, procedures, terms and conditions are not adhered to properly. If you have questions or want to discuss a situation that you can't resolve with the PD/PI, you can talk to the Office of Legal Counsel, University Human Resources or me.

One last comment, both the Mayo Clinic and the UMDNJ do clinical research with doctors that have clinical practices. That is a very hot topic with the Feds on effort reporting. Thankfully we don't have clinical research situations so our potential exposure is considerable less but that does not mean we should be any less vigilant in caring out our responsibilities