FISCAL AFFAIRS 213 



was recognized as a theoretical possibility, but it was not permitted to work 

 a change in the calculations of overhead as any allowance would turn into 

 a profit if there were no adverse rulings by the Comptroller General. It did 

 have an important bearing on some cases, however. Overhead payments had 

 been made prior to the examination of costs by OSRD accountants and in 

 some cases these payments were found to have been excessive. While agree- 

 ing to scale down future payments, some contractors insisted upon retain- 

 ing all or a part of the excess as a "reserve" against future disallowances. 

 OSRD never recognized the validity of the "reserves" as such. When its 

 request for their return was refused in some cases, it sought at least a partial 

 refund together with a commitment to return the balance at a future date 

 when the contractor's contingent liability was no longer hanging over his 

 head. In every case, the requested commitment was given. 



Insurance 



Within a short time after the establishment of the agency, it became 

 apparent that grave insurance problems were created by the unique nature 

 of certain OSRD activities. Not only did such activities involve the normal 

 dangers of all experimental work but additional hazards resulted from the 

 military character of the projects and the urgency of their completion. As 

 illustration there may be mentioned such diverse activities as the synthesis 

 of poison gases, the development of new and more powerful explosives, and 

 following the performance of new devices in combat areas. 



One matter which early troubled some OSRD academic contractors work- 

 ing on new explosives was the possibility of a disaster of catastrophic pro- 

 portions. The chemist's faith in the accuracy of his calculations was not 

 always reflected in the university's business office confronted with the specter 

 of a series of explosions resulting from improper handling of new explosive 

 compounds. An explosion on a truck transporting a new explosive through 

 the streets of a city might result in damage claims in an amount suf&cient 

 to wipe out an endowment. 



OSRD explored the possibility of seeking Congressional authorization to 

 establish a contingent fund out of which to indemnify contractors directly. 

 However, the Bureau of the Budget in 1942 rejected the suggestion, point- 

 ing out that accurate calculation of the sum was impossible and concluding 

 that it would be inadvisable to tie up a large sum of money without some 

 factual basis for establishing its sufficiency. 



With the permission of the Bureau of the Budget OSRD then sought 

 legislative authorization to promise indemnity to the contractors out of 

 funds to be appropriated later. The authorization was granted in the 1943 

 Appropriation Act (PubUc Law 678, 77th Congress) in the following 

 language: 



