Indirect costs of sponsored research projects and educational programs are as necessary as are the direct costs. This report demonstrates that they are real costs and that sponsors such as the Federal Government receive more than equitable treatment in the computation and application of indirect costs. The areas discussed include: the computation of allowable indirect cost rates under Federal Management Circular No. 73-8; unallowable costs; audit, negotiations and application; the question of equities; variation in rates; federal limits on indirect cost rates and cost sharing; attitudes of nonfederal sponsors; indirect costs in industry and not-for-profits; recent increases in indirect cost rates; and use of indirect cost reimbursements. (JMF)