Question about ethics and possible misappropriation of research funds I am working for a professor who started out recently. Most new professors get start-up funding from the department which helps them pay for their first students. Right now I am working in the lab with another PhD candidate; both of us have been funded by departmental funds until now.

The PhD is working on a project which has no funding. I am working on a corporate-funded project for my thesis.  Now I am the PI for this project internally. So I did the whole project as my thesis and I was listed as the PI on consent form (approved by my university IRB) when I carried out the final testing of my product with the corporate sponsor.

Here is where things turn shady. When I carried out my testing, we paid the participants through my research funds (the account number for the project is listed on some departmental documents that I had to sign to get cheques for test participants). In my GRA contract, it was specified that my funding was coming from the departmental account and when the PhD candidate showed me their contract, it was getting funded from my project account (the stipend account number was my project account number and I have confirmed this with a student departmental assistant). Their stipend was coming from my project funds.

I spoke with few other people in the department, and came to know that when the department gives seed funding to new professors, there is a limit in stipend they can give.  So to give the PhD student more funding, my advisor is using my research funds (for which I am PI) to pay this stipend and thus is getting double my stipend.   I am still getting funded by the department, so I get a lot less.

Screwed-up thing is this project is highly successful as I did a lot of hard work and I am not getting any financial incentive. In fact, it's all going to the other researcher who is nowhere involved in this project. The sponsor is giving my advisor funding for a second phase next month and also offered me a full-time job at their corporation. I should probably mention that I don't have a good relationship with my advisor and we fought multiple times in past due to some other issues but the PhD candidate gets along very well. They are like  family friends and have  very good social interactions.

I am graduating this December, so it probably won't matter anyway, but is this ethical? Can I speak with my department chair about this? I had asked my advisor multiple times to increase my stipend but they said they cannot. The questions is not about money — it's more about betrayal by your own advisor who you trust to be fair.

I still have the copy of the departmental documents used to order cheques for testing showing my account project number and a copy of the PhD candidate's contract.
I cannot really tell what you question is about, but let me try and clarify a few things.

First, being the PI on an institutional review board application does not make you the PI for the funded project. It is not clear what you mean by "your" project funds, but from your description it does not sound like it is your funding, but rather funding that your supervisor was awarded and is providing you access to for you to accomplish your thesis.

Second, applications for funding generally have around 3 aims. The linkage between these aims can be pretty loose. It is not uncommon for students working on different aims of the same grant to think their projects are completely independent. Often a grant might not provide funding for all the staff required to complete the aims. In fact a selling point to potential funders is the ability to leverage their funding with "outside" funds like a departmental studentship.

The real issue I think in your question is if it is ethical for your supervisor to use her funding to pay PhD students different amount. The answer to this is that it is most likely ethical. It is possible your supervisor has circumvented the policies of both the funder and the department, but this seems unlikely. It is quite likely that your department has a fixed, relatively low, stipend for internally funded PhD students, but allows for PhD students funded from outside grants to be paid more. In my mind there is nothing unethical about that.

So then the question is why is your lab mate being funded by the grant while you are being funded by the school. No one but your supervisor can answer this. Maybe she flipped a coin. Maybe she thought your the project of your lab mate was closer aligned to the aims of the grant. Maybe, as you say, she likes your lab mate better and cannot be trusted. Before going down that road, you need to remember that it is quite possible that the decision of who to fund from where may have been made prior to either of you applying to grad school.