Technically Allowed: Federal Scrutiny of Stanford University's Indirect Cost Expenditures and the Changing Context for Research Universities in the Post-Cold War Era

Abstract

Stanford University's indirect cost rates for federally sponsored research dramatically increased from 58 percent in 1980 to 78 percent in 1991. Faculty frustration with increasing rates and scrutiny from a zealous government contracting officer culminated in a congressional inquiry into Stanford's indirect cost accounting practices in 1990 and 1991. The investigation revealed controversial luxury expenses charged to the government, including a yacht and antiques for the Stanford president's home, which attracted extensive public attention. Stanford president Donald Kennedy admitted some expenses were accounting errors but defended many expenses as permissible under government rules. Stanford's aggressive overhead recovery practices represent the institution's struggle to adapt to a changing economy for sponsored research in the twilight of the Cold War. The congressional response, which included a cap on administrative cost recovery for all universities, highlighted how shifting federal priorities—from defense research to deficit reduction—strained the relationship between the federal government and academic science.