A review by the General Accounting Office of various aspects of indirect costs associated with federal health research grants is presented. After an introduction detailing the scope of the review and defining indirect costs and federal participation, the report focuses on the causes of the rapid increase of indirect costs. Among findings was that 74 percent of the grantees stated that utilities and compliance with government mandated programs and administrative requirements were responsible for rising costs. It was discovered that comparing indirect cost rates among institutions was not meaningful because of accounting system differences, different institutional characteristics, and the types of rates that were negotiated. Indirect cost principles were found to be inconsistent in federal guidelines. Audit coverage frequency and negotiation practices were found to vary, with some agency officials relying on their own desk reviews, while others performed their own onsite audits, and still others relied on federal audit agency reviews. Among recommendations was that it should be required that there be a consistent presentation of principles in the guidelines for educational institutions. Among appendices are letters from various government departments and summaries of questionnaire results. (PHR)