The University of Alabama at Birmingham Overstated Chilled Water Costs in Its Facilities and Administrative Cost Proposal

In its fiscal year (FY) 2010 Facilities and Administrative (F&A) cost proposal, the University of Alabama at Birmingham (UAB) included $8.6 million in chilled water costs that were not in accordance with Federal requirements that costs must be reduced by applicable credits. As a result, UAB's negotiated F&A rate was inflated by 1 percent per year for FYs 2012 through 2015, and it potentially received as much as $5.9 million in overpayments from the Federal Government.

We recommended that UAB work with the Department of Health and Human Services' Cost Allocation Services to determine the portion of the $5.9 million that was unallowable under Federal requirements, refund the unallowable portion (including any interest) to the Federal Government, and ensure that appropriate officials review future proposals for compliance with Federal requirements prior to submission.

UAB acknowledged that it overstated chilled water costs in its proposal and commented that it had taken steps to ensure that appropriate officials review future proposals for compliance prior to submission. However, UAB contended that it included $16.5 million in chilled water costs in the proposal, that it overstated chilled water costs by $3.6 million, and that its costing model identified overcharges made to Federal awards of $1 million. After reviewing UAB's comments and additional information, we agreed that UAB included $16.5 million in chilled water costs, but we maintained that UAB overstated chilled water costs by $8.6 million in costs not reduced by revenues (applicable credits) and that it received as much as $5.9 million in overpayments.