Indirect Costs. As a cost reimbursement accountant in a large public research university, you are aware that federal agencies have increased auditing efforts in the area of federal research grants to higher education institutions. In particular, OMB Circular A—21 detailing allowable costs for colleges and universities receiving federal funds. The administration has asked you whether it is appropriate to include certain overhead costs in the pool of indirect costs (facilities and administrative costs) that are recovered in most federal research awards. Items include (1) holiday lights put on the president’s university-owned home, (2) library books in the research section of the undergraduate library, (3) the cost of a large boat used by higher administration in meeting with faculty and outside researchers for social events, (4) advertising new graduate programs in the large urban newspaper, (5) clerical salaries in the academic departments where a large amount of research is conducted, and (6) utility bills in the research wing of one of the buildings.
Required
Write a short professional memo to the administration giving your opinion about whether these costs would be allowable “indirect costs” to be recovered in part by federal research grants. Defend your position.