FISCAL AFFAIRS 211 



Cruikshank, Edwards and their staff proceeded slowly in an effort to work 

 the matter out with the contractors and in the end they were successful 

 in carrying the institutions with them in an agreement upon the proper 

 elements to be considered, which was no mean achievement. 



A detailed schedule of allowable charges was adopted and inserted in the 

 OSRD Contract Manual {Fiscal)^ where it will be available for consulta- 

 tion by Government personnel administering research contracts for years 

 to come. Overhead costs were first divided among the following nine major 

 heads, which are listed merely to give an idea of the type of cost covered 

 by the overhead allowance: 



A. Administrative and general expenses 



B. Departmental expenses 



C. Depreciation of building space used for performance of the subject work 



D. Depreciation of equipment used for performance of the subject work 



E. Interest on investment in buildings and equipment used for performance of 

 the subject work 



F. Cost of maintenance and operation of facilities 



G. Interest on average outstanding receivables 

 H. Cost of the use of technical libraries 



I. Other specific expenses. 



The manual gives a detailed list of items under each of the major heads, 

 and suggests formulas for determining the proper allocations. This pro- 

 cedure for determination of overhead costs on OSRD academic contracts 

 proved to be adequate for the protection of the Government's interests and 

 satisfactory to most OSRD contractors. In examining the overhead costs of 

 the largest academic and industrial contractors to November 30, 1945, OSRD 

 cost accountants found the following situation: (i) approximately 51 per 

 cent had received excess overhead payments largely because of the expansion 

 of operations under the contracts involved. Refunds to the Government or 

 recovery through reduced future payments were obtained; (2) approxi- 

 mately 40 per cent broke even; (3) approximately 9 per cent received over- 

 head allowances amounting to less than overhead costs, the deficits in most 

 cases being small; 6 per cent desired to absorb such losses and 3 per cent 

 asked for, and received, contract amendments to make them whole. 



Control and adjustment of overhead payments were effected not only by 

 securing refunds when required and reducing overhead percentages when 

 necessary, but also in cases where contractors' operations reached high levels 

 or were of a fluctuating nature, by execution of formal agreements placing 

 a ceiling upon the number of dollars which might be collected within a 

 given period under the overhead provision. These ceilings were changed 

 from year to year to allow the collection by contractors of their actual over- 

 head costs. Overhead computations were based upon the contractor's total 



