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HARVARD AIEDICAL SCHOOL BETH ISRAEL HOSPITAL Mailing Address: DIVISION OF RLiPIRATORY DISEASES ~...6ARY. L.~ HUBER, ~ M.D., CHIEF Lee Stanford Shook, Hardy & Bacon Mercantile Bank Tower 1101 Walnut Kansas City, Missouri 4106 Dear Lee, BETH ISRAEL HOSP(TAL $30 BROOKL(NE AVENUE O6TON, MASSACHUEETTf 02215 (617) . 733-2391 March 22, 1978 Relative to our conversations on overhead allotment on our research grants, particularly as that matter relates to the operation of Charlesgate West, I am summarizing for you the following information. Harvard Medical School currently has three different overhead rates, depending upon the location of the research for which the grant is awarded. When the research is performed "on campus," that is in a building owned and managed by the University within the Medical School complex, the overhead rate is 69.8% of all direct costs. When the research is performed at one of the Harvard affiliated hospitals, such as the Beth Israel Hospital, the overhead rate is 75.6% of al~l direct costs. When the research is performed at an "off campus'('site, such as Charlesgate West, overhead rate is 47.8% of the total direct costs. In that perspective, it is perhaps easier to understand why there are sometimes such significant pressures on us to expend as direct costs from the tobacco industry funding monies for things that might otherwise be covered as indirect costs through the overhead allotment. With an overheadirate of 10%, a tobacco industry funding pays far less to the p parent institution, relative to government grants. ~ Our large contract with the National Cancer Institute is awarded ~ through the Beth Israel Hospital, not through Harvard Medical School. WPI, The Beth Israel Hospital has a different formula, and does not charge ~ overhead rates on all direct costs, but only some of them. On the NCI contract, for example, there is an overhead charge of 45.34% on all salaries and'wages expended on personnel working primarily at the Beth Israel Hospital. For the Hospital "off campus" expenditures, there is a 50.03% overhead charge on all salaries and wages for personnel primarily located at Charlesgate West. There are no additional overhead charges on the other direct costs in the contract, as far as I can determine. Part of the contract, however, is expended as a((contract(` to Dr. First and his group at the Harvard School of Public Health. On that portion of the NCI contract, there is an overhead charge of 69.8% on all direct cost expenditures, including salaries and wages, as well as expendable supplies, but not expenditures for equipment or equipment maintenance.

We have, in addition, a grant from the National Institute of Drug Abuse to study tobacco an&marijuana smoke on the defenses of the lung. This grant is administered through Harvard University and has an"old" overhead rate of 41.5%. This is a very complicated grant, and was supposed to be awarde&over a six year period from 1972 through 1978. However, in part because of a delay encountered with our.move from the Boston City Hospital to the Beth Israel Hospital, and in part encountered because of the unavailability'of marijuana research cigarettes from the Federal Government, there have been several periods of "extension without funding" and altered, implementation periods. As a result, the grant will now, run, theoretically, through June 30, 1980. The overhead rate of 41.5% is an "off-campus" rate for the Medical School. In determining this rate, however, consideration was not given to the expenditure of direct funds, or for that matter, indirect funds, for the maintenance of Charlesgate West. Our best estimate of that cost should be in the range of $' 6,000-$8,000 per year. There have been a series of rather complicated discussions on this matter, both internally within the Hospital and with the grantors at the National Institute of Drug Abuse. Mr. Kneeland, of the Hospital, had agreed in discussions with us, to allocatee that portion of the Hospital's share of the indirect costs that would cover these expenditures at Charlesgate West from the monies that they have received. Ms. Coulman, however, has advised us that the costs of the marijuana research for the operation of Charlesgate:iWest should be taken from the direct costs awarded to us by the Government. However, we did not budget monies in our request for research for this purpose. Ms. Coulmanihas suggested that we decrease accordingly the commitment to professional salaries now awarded on the marijuana grant,and transfer these costs to the tobacco grant, using the Although this is complicated, I do hope it helps clarify some of the questions you raised. Please advise me if I can be of any additional service to you. tobacco industry funding. twice for the same facilities. The same consideration should be given,to the as well as providing some assurance that the Government is not being charged' regional officer toievaluate the actual indirect cost allotments for all grants, suggestions of NIH, because it would probably involve bringing in a Government rendered. As best I can tell, the Hospital is reluctant to take any of the the indirect costs to direct costs, and pay for the expenditures as services out of the indirect funds now awarded for this grant, or (3) transfer some of to cover the expenditures at Charlesgate West, (2) simply pay the expenditures we either (Q) request supplemental funding,either as a direct or indirect cost, NIH, a Mr. Manischewitz, appears to have the best solution. He suggested that would be indirectly paying for marijuana research. The contract officer at one category in one grant to another category imanother grant, the industry operating Charlesgate West. That would represent simply the transfer from money "freed'up",so to speak, in the marijuana grant for the direct costs of Sincerely yours, I Gary L. Huber, M.D., Chief Respiratory Diseases Unit r.~ ~ GLH/mc .1~ ~ ~ !~ 461-

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