NOT FOR RELEASE UNTIL AUTHORIZED BY THE COMMITTEE March 10, 1975 MEMORANDUM FOR THE CHAIRMAN Re: Overhead Reimbursement to Grantees and Contractors By directive dated July 8, 1974, the Committee requested that a study be made of the overhead reimbursement policy of the Department of Health, Education, and Welfare with regard to grantees and contractors. The study has been completed and the results are included in this report. Respectfully submitted, CR Jnd WEN C. R. Anderson Chief of the Surveys and Investigations Staff House Appropriations Committee Overhead Reimbursement to Grantees and Contractors Laird a chat David A. Schmidt, Director PREFACE In the early stages of this study, the Investigative Staff learned that the Department of Health, Education, and Welfare (HEV) could not provide on a department-wide basis data on indirect costs, or overhead, being paid to grantees and contractors in the last 5 years. The National Institutes of Health (NIH) was able to provide total direct and indirect cost payments for research grants only. The Public Lealth Service (PHS) provided indirect cost information for most of its grants for FYs 1970 through 1974. No other HEW agency provided indirect cost data for more than one year. In the absence of such data, it is the opinion of the Investigative Staff that HEW is hardly in a position to control the expansion of overhead costs or to prevent the dollars currently going into overhead from increasing beyond the present level. Even if HEW were able to identify overhead dollars for all grants and contracts, such information still would be inadequate for effective control because of the lack of uniform definitions and standards as to the elements which are identified as direct and indirect costs. The problem of indirect costs has been given intensive study by Government agencies, national advisory groups, universities, and private foundations. Before World War II, Federal expenditures for research and development at institutions of higher education were confined almost solely to grants to agricultural experiment stations connected with land-grant colleges. The National Science Foundation estimated that in 1940, Federal expenditures at educational institutions did not exceed $15 million, while by 1955 the amount being spent for research and development at educational institutions had risen to over $150 million. In FY 1974, NIH alone awarded research grants amounting to over $1 billion. |