Adding Federal Grant Compliance to the Audit Plan: the University of Florida Case

Greg Grabinski
Executive Editor
Loyola University Chicago School of Law, JD 2016


One of the best sources for designing a compliance program’s annual audit plan is to look around to see what is happening at peer institutions.  If there is a regulatory settlement in a peer organization’s similar business line, then the subject-matter should be added to the compliance audit plan list.  The University of Florida (UF) provides good example of lessons learned for federal grant compliance.

On November 20, 2015, the Department of Justice announced that UF agreed to pay $19.875 million to settle False Claims Act allegations that it improperly billed the U.S. Department of Health and Human Services for administrative costs and salaries associated with hundreds of federal grants. The grants at issue were administered from UF’s campuses at Gainesville and Jacksonville between 2005 and December 2010.

The federal government alleged that the university – which receives millions of dollars in grant funding every year – over-billed hundreds of grants for the costs of its employees’ salaries, where there was a lack of documentation to substantiate those costs. In addition, the government claimed that the university directly charged some grants for costs related to certain equipment and supplies which were supposedly prohibited pursuant to federal regulations associated with the grants. Finally, the United States alleged that the university inflated the costs for services performed by Jacksonville Healthcare Inc., an entity affiliated with UF’s Jacksonville campus.

UF officials stated that they first discovered the improper use of funds during an internal audit in 2005 and that those issues “have since been remedied with significant upgrades in systems and procedures.” In particular, UF has installed a new software platform, which has enhanced its ability to manage the verification processes associated with its federally funded projects. In addition, researchers are now required to undergo training on federal accounting requirements. Continuous training, auditing and software updates will need to be maintained throughout UF’s systems as well as in any health care system looking to avoid such violations.

The UF case highlights a high risk area for any organization receiving federal grants, namely the accuracy of the charges booked against the grants.  Not only are there a host of federal regulations on how the finances of grants are managed and complex parameters governing what costs can be charged to the grant, many grants contain their own restrictions on allowance of certain charges unique to each grant. The lesson learned is clear: compliance programs for organizations that take federal grants should have grant compliance on their annual compliance audit plans.