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University of Florida Agrees To $19.8 Million Federal Settlement

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The University of Florida is involved in a federal settlement to repay nearly $20 million to the United States government.

The U.S. Department of Justice announced a settlement Friday afternoon in allegations that the university “improperly charged the U.S. Department of Health and Human Services for salary and administrative costs on hundreds of federal grants.” According to the release, the investigation into improper use of funds covered a period between 2005 and 2010.

UF officials say that they first discovered the misuse of funds nine years ago and the issues “have since been remedied with significant upgrades in systems and procedures,” according to a press release.

“The investigation by the Department of Justice was over a large cadre of grants, nearly 1,900 grants in all, with a total amount of money involved close to a billion dollars,” said David Norton, vice president for research for the University, in an interview with WUFT News.

The UF release said this $19.875 million settlement represents 2 percent of total HHS grants to the University.

According to a publicly available federal database, UF received $335.7 million as the “University of Florida” from HHS in the 2005-2010 period. By that number, the settlement represents about 6 percent of funds received.

“It has no impact from the support we’ve received from HHS for funding, in fact our funding has increased since the investigation occurred up until to this date. There never was a question about the quality of research that the University of Florida did, it simply was a documentation issue that was resolved with today’s settlement,” Norton said.

Norton became vice president of research in January 2012. Winfred M. Phillips, who is now UF’s Executive Chief of Staff in the President’s Office, served as the research vice president from July 1999 to Sept. 5, 2011.

WUFT News contacted Phillips’ office, but he was not available for comment Friday afternoon.

UF said it first discovered the “weaknesses in the system” during an internal audit in 2006 and a “shortcoming” was also an “area of focus during a routine federal audit of the university’s fiscal 2008 federal grants,” according to the release.

“UF will pay the nearly $19.9 million settlement from investment earnings and other non-state funds that would have been invested in research, much of which had been put aside for years in anticipation of today’s settlement,” Norton said in the release.

The university also wrote that none of the settlement funds will come from tuition or state- and tax-payer-provided funds.

The full U.S. Department of Justice release is below, and the university’s response follows:

  • Dept. of Justice Release 
  • UF Release 
  • UF Memo to Faculty 

The University of Florida (UF) has agreed to pay the United States $19.875 million to settle allegations that the university improperly charged the U.S. Department of Health and Human Services (HHS) for salary and administrative costs on hundreds of federal grants, the Department of Justice announced today.  The grants in question were administered from the UF campuses in Gainesville and Jacksonville, Florida.

“The monies utilized by HHS to fund important medical research and clinical programs across the nation are both precious and limited,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates that the Department of Justice will pursue grantees that knowingly divert those funds from the projects for which they were provided.”

“As the U.S. Department of Health and Human Services (HHS) awards more grant dollars than any other government agency, prudent oversight of those funds is absolutely essential,” said HHS Regional Inspector General for Audit Lori S. Pilcher.  “Grantees must have internal controls promoting accountability and transparency,” she said.  “Taxpayers should expect nothing less.”

The University of Florida receives millions of dollars in grant funding from HHS on hundreds of grants each year.  The settlement announced today resolves the alleged misuse of grant funds awarded by HHS to UF between 2005 and December 2010.  The United States contended that the university overcharged hundreds of grants for the salary costs of its employees, where it did not have documentation to support the level of effort claimed on the grants for those employees.  The government also contended that UF charged some of these grants for administrative costs for equipment and supplies when those items should not have been directly charged to the grants under federal regulations.  Lastly, UF allegedly inflated costs charged to HHS grants awarded at its Jacksonville campus for services performed by an affiliated entity, Jacksonville Healthcare Inc.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $26.5 billion through False Claims Act cases, with more than $16.7 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch and the HHS Office of the Inspector General, Office of Audit Services and Office of Investigations.

The claims resolved by the settlement are allegations only; there has been no determination of liability.

The University of Florida said today’s settlement with the federal government primarily deals with bookkeeping deficiencies that were first discovered nearly nine years ago and have since been remedied with significant upgrades in systems and procedures. 

“UF cooperated fully with the Department of Health and Human Services and the Department of Justice, and has thoroughly revamped its bookkeeping procedures,” said UF Vice President for Research David Norton. “UF recognized that certain compliance systems had weaknesses and was in the process of addressing them when HHS began its audit years ago. UF has added automated support systems, personnel and training to make its compliance systems fully responsive to the expectations of federal agencies.”

“The university’s research budget – totaling $6 billion over ten years – continues to grow and produce groundbreaking results. UF proudly remains one of the top public research institutions in the country with its research awards last year reaching a record $706 million,” Norton added. “From breakthroughs in the treatment of Hepatitis C, Parkinson’s Disease and Multiple Sclerosis to advances in nerve regeneration and the fight against Ebola, UF research continues to save and improve lives, enhance agricultural output and advance technology.”

During an internal audit in 2006, UF officials first uncovered weaknesses in the system under which researchers confirm the allocation of salaries charged to research grants.  This shortcoming was also an area of focus during a routine federal audit of the university’s fiscal 2008 federal grants.  HHS indicated that UF’s bookkeeping system failed to consistently verify the amount of time and expenses UF employees charged against grants from 2005 to 2010. “Rapid expansion of the university’s sponsored research and an unexpectedly difficult rollout of a complex new university-wide accounting system significantly contributed to these issues,” Norton said. “This lack of specificity was unintentional but resulted in technical errors respecting the government’s accounting requirements. In the end, the settlement announced today is about 2 percent of the amount of funding UF received from HHS during the affected period.” 

In response to the internal audit findings, the university began to upgrade its procedures and processes in 2007. Since then, a new software platform was installed that significantly improved the university’s capacity to manage the verification process for all federally funded projects.  The university also started a comprehensive initiative to assess and improve all fiscal compliance functions relative to research contracts and grants. New processes and policies were implemented.  Researchers now receive mandatory training about federal accounting requirements.  The university developed and launched myinvestiGator, a web-based project-management tool that was a finalist last year for the Prudential Productivity Award, which is given by Florida to state employees who find ways to increase productivity.

UF will pay the nearly $19.9 million settlement from investment earnings and other non-state funds that would have been invested in research, much of which had been put aside for years in anticipation of today’s settlement, Norton said. None of the money will be paid by state taxpayers; the settlement will have no effect on tuition rates. Norton added that the university agreed to settle the matter to avoid years of litigation that would have needlessly drained resources over an issue that was long in the past. The audit findings have not affected the federal government’s level of research funding to the University of Florida. Over the past 15 years, UF’s research has more than doubled with renewed and new awards.

The faculty were also e-mailed a memo from Norton on Friday afternoon:

To:       UF faculty, staff, administrators, and UF Health-Shands employees

From:   David Norton, Vice President for Research

RE:       Settlement Agreement with Federal Government

On November 20, 2015, the federal government announced a settlement with the University of Florida for issues related to research accounting systems from 2005-2010.  The university agreed to pay $19,875,000 to resolve the matter. 

The settlement closes an investigation of the university by Department of Health and Human Services (HHS) and the Department of Justice primarily dealing with deficiencies first discovered nearly nine years ago that have since been remedied with significant upgrades in systems and procedures.  The university  uncovered weaknesses in its effort reporting certification process, the system by which researchers confirm the allocation of salaries charged to research grants, during an internal UF audit in 2006.  This shortcoming was also an area of focus during a routine federal audit of the university’s fiscal 2008 federal grants.  UF cooperated fully with the federal government throughout its inquiry.  At no point was there any suggestion by the federal government of criminal wrongdoing.

UF recognized that certain compliance systems had weaknesses and was in the process of addressing them when HHS began its audit. Rapid expansion of the university’s sponsored research and an unexpectedly difficult rollout of a complex new university-wide accounting system contributed to these issues.  The shortcomings were unintentional but resulted in technical errors respecting the government’s accounting requirements.  The settlement is about 2 percent of the amount of funding UF received from HHS during the affected period.

UF has thoroughly revamped its processes and procedures for managing federal grants and contracts, adding automated support systems, personnel and training to make its compliance systems fully responsive to the expectations of federal agencies. A new software platform was installed that significantly improved the university’s capacity to manage the verification process for all federally funded projects.  The university also started a comprehensive initiative to assess and improve all fiscal compliance functions relative to research contracts and grants. Researchers now receive mandatory training about federal accounting requirements.  The university developed and launched myinvestiGator, a web-based project-management tool that was a finalist last year for the Prudential Productivity Award, which is given by Florida to state employees who find ways to increase productivity.

UF will pay the settlement from investment earnings and other non-state funds that would have been invested in research, much of which had been put aside for years in anticipation of today’s settlement. The majority of these funds are coming from the UF central administration; HHS-supported colleges are contributing as well.  None of the money will be paid by state taxpayers; the settlement will have no effect on tuition rates. The university agreed to settle the matter to avoid years of litigation that would have needlessly drained resources over an issue that was long in the past. The audit and investigation have not affected the federal government’s level of research funding to the University of Florida.  Over the past 15 years, UF’s research has more than doubled with renewed and new awards. 

The university’s research budget – totaling $6 billion over 10 years – continues to grow and produce groundbreaking results. UF proudly remains one of the top public research institutions in the country with its research awards last year reaching a record $706 million.  From breakthroughs in the treatment of Hepatitis C, Parkinson’s disease and Multiple Sclerosis to advances in nerve regeneration and the fight against Ebola, UF research continues to save and improve lives, enhance agricultural output and advance technology.  We remain committed to UF’s continued prominence in the world of scientific research.  We have one of the strongest research portfolios in the country with outstanding faculty that continue to push the boundaries of knowledge, discovery and invention.  In fulfilling our mission as a major research university, it is critically important that we maintain a standard of excellence not only in the quality and impact of our research, but also in meeting our obligations relative to accountability and research compliance.  To the UF faculty and staff, thank you for your continuing efforts in helping us to be good stewards of the resources afforded to us by our federal sponsors.

 

About Ethan Magoc

Ethan is a journalist at WUFT News. He’s a Pennsylvania native who found a home reporting Florida’s stories. Reach him by emailing emagoc@wuft.org or calling 352-294-1525.

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