Subject: Re: FWD: Court: Domain fees appear illegal

From: Tim Salo <[email-masked]>
Date: Wed, 4 Feb 1998 15:27:59 -0600 (CST)

> Date: Wed, 4 Feb 1998 10:24:28 -0800 (PST)
> From: Karl Auerbach <[email-masked]>
> Subject: Re: FWD: Court: Domain fees appear illegal
> 	[...]
> The situation gets far more interesting if the case goes further and says
> that that part of the fee above cost (remember, the NSF-NSI cooperative
> agreement is formally a "cost plus" contract) must be refunded.  In that
> case the accounting for "cost" can get very interesting.  For example, are
> the expenses for NSI's new buildings and such to be considered as "cost"?
> 	[...]

The process of determining "cost" in federal cost-plus-fixed-fee
contracts is spelled out at great length in the Federal Acquisition
Regulations (FARs).  The contracting organization must determine its
overhead costs consistent with the FARs.  I believe that most federal
contractors have their overhead rates audited now and again.

[By the way, I understand that the standards for academic institutions
are quite a bit less strict than for commercial institutions.  Also,
if I recall correctly, a famous West Coast university claimed expenses
for their President's Yacht as part of their overhead rates.  The University
later refunded a bunch of money.]

[[One could even make the argument that, for example, critical DNS
registration services should be performed by for-profit organizations
because they might be held to stricter accounting standards.]]

-tjs

---

From: Vince Fuller <[email-masked]>
Date: Wed, 4 Feb 98 15:12:40 PST

> later refunded a bunch of money.]

This is a myth that has been floating around for a long time, originated by
by a self-aggrandizing ONR auditor who was trying to make a cash grab as a
"whistle-blower" and perpetuated in the grand tradition of yellow journalism.
The fact that the ONR had neglected its duty to conduct periodic audits for
over 10 years was a contributing factor - it isn't surprising that a few errors
accumulated when one considers that hundreds of millions of dollars were and
still are spent annually on research at the University.

What really happened was that an alumnus donated a yacht to said University.
When the yacht was put on the books as an capital asset, someone used the wrong
account number and the result was that payments for its maintenance came out
of a fund that was subject to government indirect cost reimbursement.

To dispell a few misconceptions:

    - the yacht didn't belong to the President. I don't believe he was even
      aware that it existed.

    - the yacht was not purchased using government funds

    - the audit which revealed this mistake (and a number of others) agreed
      that it was a mistake, with no intent to defraud

Of course, the truth and later exoneration of the University didn't make quite
the same headlines as the sensational and incorrect "UNIVERSITY BUYS YACHT
WITH GOVERNMENT FUNDS" so it didn't receive quite the same play in the media.

	--Vince

P.S. My information is second hand, though I believe it to be reliable - an
     ex-girlfriend worked in the University budget office, specifically on
     indirect cost accounting, and was closely involved in the audit process.

P.P.S. I am not an alumnus or otherwise related to said University. I am
       a former employee with some residual loyalty resulting from being
       treated well by an organization with very high standards of fairness
       and integrity; seeing that integrity questioned by those who believe
       only what they read in the headlines (and who miss the retractions
       on page A-10 weeks or months later) or see in a 15-second CNN sound bite
       is something I find mildly annoying.

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