212 ORGANIZING SCIENTIFIC RESEARCH FOR WAR 



OSRD business without attempting a further allocation as among different 

 OSRD contracts. 



Both academic and industrial contractors displayed a splendid spirit of 

 co-operation in assisting OSRD cost accountants to make examinations and 

 audits of their accounts and records. In most cases reductions of over- 

 head percentages were willingly accepted, and many refunds were made 

 on an entirely voluntary basis. In practice the overhead provision as admin- 

 istered seems to have served its purpose of leaving the institutions whole, 

 neither richer nor poorer for having devoted a part of their facilities to this 

 phase of the public interest in a period of great national peril. 



One aspect of the overhead problem was potentially quite troublesome. 

 Academic institutions operate without financial profit; there is thus no 

 account to which they can charge losses under Government operations 

 except as they draw upon funds for their normal educational activities. 

 Expenditures under OSRD contracts were made for the purposes of the 

 contract. The beneficiary of the expenditures was the Government. They 

 would not have been made except at the request of the Government and 

 in the reasonable expectation that they would be reimbursed by the Gov- 

 ernment. 



Yet, conceivably an expenditure ordered under a contract in good faith 

 and made by the institution in good faith under such direction might upon 

 audit some months or years later be held by the Comptroller General to 

 have been improperly made. In what position would such a ruling leave 

 the institution? It received no benefit from the expenditure, but the ruling 

 of impropriety might require the institution to dip into its educational 

 funds to make restitution to the Government. In an extreme case, an insti- 

 tution supported by state funds might find itself legally unable to use its 

 funds to meet the adverse ruling of the Comptroller General. Clearly such 

 a situation has nothing in common with a profit-making establishment 

 being required to return part of the profit earned under a Government 

 contract. 



To the extent of its ability OSRD tried to reassure its academic contractors 

 that such a contingency was remote. OSRD endeavored to establish the 

 legitimacy of expenditures its contractors were called upon to make. It 

 aided contractors in adducing the facts which would assist the Comptroller 

 General in reaching a favorable decision. But OSRD obviously could not 

 take the final step and assure the contractors that there would be no dis- 

 allowances. Further, as OSRD was but a temporary agency, there was the 

 chance that it might not even be in existence to aid the contractor in pre- 

 paring to meet a disallowance. 



Some contractors contended that in holding the overhead allowance to a 

 figure which would cover only actual costs, OSRD left the contractor in a 

 position where in the end he might suffer a substantial loss. This contention 



