Word: overheads
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...said that Bob Dylan, for example, would require a "huge" $45,000 overhead cost...
...dollars intended for scientific research. This week's hearing is expected to focus not only on Stanford's questionable accounting practices but also on the agency that monitored the school's federal contracts, the Defense Department's Office of Naval Research. That group failed to audit thoroughly Stanford's overhead costs for almost a ) decade. Says Middlebury College President Timothy Light of the current system for underwriting university-based research: "It's a ghastly mess...
...center of the maelstrom is a set of arcane rules, installed gradually after World War II, that turned the Federal Government into America's primary sponsor of university research. Under these regulations, the government foots the bill for research and many of the overhead costs of doing research. These so-called indirect costs, which are not attached to any single project, include university-wide expenses like administration, libraries, roads, utilities and building maintenance. Every university charges the government a different rate for overhead, based on such considerations as geography, which determines a school's energy and wage costs...
Stanford's 74% overhead rate was among the highest in the country (it was recently slashed to 70%), in part because the school was unusually aggressive about recouping every nickel it could. "I expect our controllers to do their best on behalf of the university," says Stanford President Donald Kennedy. Some would argue, however, that Stanford's controllers were overly zealous in their quest for money. Defense Department auditors say the university has been so uncooperative in the investigation that they threatened last week to turn the matter over to the Justice Department...
Defenders of the funding system hasten to note that a 74% overhead rate does not mean that 74 cents out of every research dollar is spent on library books and electric bills. Under government regulations, universities are prohibited from applying overhead rates to certain research-related expenses. Equipment purchases, for instance, are not permitted in the total; neither are subcontracts over $25,000. Thus if a Johns Hopkins professor gets a $100,000 grant to cover his direct costs of research, he may be able to apply his school's indirect-cost rate -- 65% -- to only...