University Of Florida Agrees To $19.8M Federal Settlement

WJCT News | By Ethan Magoc

Published November 20, 2015 at 4:48 PM EST

The Department of Justice allegations include the claim that UF inflated costs charged to HHS grants awarded at its Jacksonville campus for services performed by an affiliated entity, Jacksonville Healthcare Inc.

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 started in 2010 for a period covering 2005 to 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 full U.S. Department of Justice release is below, and the university's response follows:

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.

From UF:

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.