Federal Research

Minor Changes Would Further Improve New NSF Indirect Cost Guidance Gao ID: RCED-93-140 June 3, 1993

The National Science Foundation (NSF), an independent federal agency with a budget of about $2.7 billion, promotes science in the United States through grants to research institutions. The grants pay for both direct costs, such as the salaries of the investigators and the equipment needed for a project, and indirect costs or overhead, which include utility and accounting expenses. In April 1992, GAO reported that several large universities receiving federal grant money were charging inappropriate indirect costs to the government, including entertainment expenses, depreciation of a 72-foot yacht, and the operating costs of a shopping center. This report provides information on, and identifies improvements needed in, (1) the indirect cost guidance that NSF provides to small organizations and small businesses, (2) NSF's procedures for establishing indirect cost rates, and (3) the extent to which NSF's audit guidelines and audits cover indirect cost charges.

GAO found that: (1) NSF has issued new indirect cost guidance that provides overall grant guidance and requirements, but does not cite applicable Office of Management and Budget (OMB) circulars and federal regulations on charging indirect costs; (2) NSF procedures for reviewing indirect cost rate proposals appear to be adequate; (3) review procedures include examining management and accounting system information for adequate controls and reviewing proposals for compliance with federal regulations by identifying and excluding categories of unallowable costs; (4) NSF audit guidelines for both contractor- and NSF-conducted audits include steps for examining the recipient's actual charged indirect costs and appear adequate; and (5) it believes that, to prevent unallowable or inappropriate costs from being charged to the government, adequate controls and proper oversight should be in place to detect such costs.


Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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