Published by the MIT News Office at the Massachusetts Institute of Technology, Cambridge, Mass.

Means Strengthened to Cull Disallowables

26 PERCENT
OMB Caps Administrative Costs 			

The White House Office of Management and Budget moved last week to limit 
reimbursement of administrative costs for universities which sponsor 
Federal research.

At MIT, the administrative costs for the OMB categories of "general 
administration and general expense, departmental administration and 
sponsored projects administration, are below the OMB cap of 26 percent, 
according to James J. Culliton, vice president for financial operations. 
The modified total direct costs (MTDC) are the direct costs of research 
after deducting subcontracts over $25,000, major equipment and other 
minor exclusions.

OMB said reimbursement rates for administrative costs at universities 
"currently range from 12 to 45 percent."

The announcement of OMB's proposed modifications to Circular No. A-21, 
"Cost Principles for Educational Institutions," also said:

"Existing rules will be strengthened to ensure that reimbursement of 
indirect costs for building and equipment is used for buildings and 
equipment directly associated with Federally sponsored research.  
Consideration will be given to establishing specially designated capital 
investment funds for these purposes.

"Universities will be required to ensure that the Federal Government 
does not in any way subsidize indirect costs associated with research 
supported by industry or foreign governments."

OMB will lead a task force "to review the overall Circular No. A-21 
mechanism and cost accounting standards for Federal research grants." 
The task force will include representatives from OMB; the White House 
Office of Science and Technology Policy; the Departments of Agriculture, 
Defense, Energy, and Health and Human Services; and the National Science 
Foundation.

Cost accounting standards for Federal research contracts will be 
established by the Cost Accounting Standards Board, at the request of 
OMB.

The list of 13 categories of unallowable costs, issued by OMB on April 
22 (see MIT Tech Talk, May 1) has been formally published as a legal 
notice in the Federal Register dated May 15, and is now subject to the 
statutory review period procedure before becoming administrative law.

OMB Director Richard Darman said, "America's university research 
enterprise is an indispensable contributor to US competitiveness and to 
American leadership in science, engineering and technology.  

"The Administration remains committed to funding a fair share of the 
costs of the research enterprise. But this share must not include 
excessive administrative costs. Abuses in cost recovery must be stopped.  
At the same time, since many of these abuses would not occur if there 
were agreed accounting standards, we must proceed immediately to define 
those standards," Darman said.

							Kenneth D. Campbell