American colleges and universities have long been deeply involved in research sponsored by the federal government. The total cost of such research, which is conducted primarily in the service of government missions, has been borne jointly by the government and the universities. In recent years, a growing concern with the costs of government-sponsored research has revealed some misunderstanding of the federally prescribed accounting procedures used to determine the extent to which institutions receive government reimbursement for the costs they incur in providing support for government-sponsored research. Recognizing that such misunderstanding ultimately could work to the detriment of both the government and the universities, the American Council on Education appointed an Ad Hoc Committee on Indirect Costs to study variations among universities in the procedures they use to allocate the costs of research. The committee subsequently prepared this brochure in an effort to explain factors that are involved in the determination of the rates at which institutions are reimbursed by the government for the indirect costs of research. (Author/JS)