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In settling allegations that it misused federal research dollars, Florida International University joins highly select company. While such cases are rare, Harvard University agreed in 2004 to return $3.3 million of a $5.5-million grant after auditors questioned the expenditures of four research-and-training programs funded by the National Institutes of Health. Also that year, Johns Hopkins agreed to pay $2.6 million to settle allegations that researchers overstated the amount of time they were spending on a federally financed medical research project. FIU's $11.5-million settlement is believed to be among the largest of its kind ever by a university.

State officials are closely watching how FIU takes the hit. Under the terms of the settlement, FIU paid the government $2 million in February using profits from its bookstores, concession sales and other "auxiliary" revenue sources. The $9.5-million balance was paid in June (plus about $100,000 in interest) using a tax-exempt loan from Regions Bank at a below-prime 3.15% fixed rate. Closing costs were $25,000.

In an interview in September with the school's campus newspaper, The Beacon, FIU President Modesto Maidique said the university will make loan payments using the interest off short-term investments of its operating revenue. Under a new state policy, each public university in Florida is free to invest its funds as it chooses rather than collectively through the State University System. Typically, those investments have returned about 3% -- revenue the schools pump back into their general operating funds for academic and non-academic programming. But Maidique believes FIU can generate even better returns, 5% or more, allowing the loan to be repaid without affecting general operations or tapping donations. He says the loan will be paid off within five years.