ACCOUNTING 202
WRITING ASSIGNMENT 3

Upward cost pressures and less support from state governments have financially 
squeezed public and private institutions of higher education.  Such 
institutions are increasingly asking their researchers to cover overhead costs.
In fact, most universities attach a fixed percentage onto direct research costs
to cover overhead costs.  For example. at Harvard, the Medical School asks for 
88 cents for each dollar of research cost; similarly, Yale asks for 60 cents 
and MIT asks for 57.5 cents.  The U.S. government, as the predominant funding 
source for most research conducted by universities, ultimately foots much of 
the bill for overhead costs.

Write a brief memo to Rep. Clinger.  In the memo, describe why the practice of 
automatically reimbursing overhead costs results in universities having little 
incentive to control overhead costs and also results in noncompetitive pricing 
for performing research services.