Included in government research grants to universities are indirect cost payments designed to compensate for the researchers’ use of the schools’ facilities. Stanford University received approximately $240 million in federal research funds annually. About $75 million went to actual research, and Stanford billed the federal government $85 million, or 20 percent of its operating budget, for its overhead.180 The rest of the research funds went toward employee benefits. 

An audit of Stanford’s research program in 1990 by U.S. Navy accountant Paul Biddle revealed that the school billed the government $3,000 for a cedar-lined closet in president Donald Kennedy’s home (Hoover House), $2,000 for flowers, $2,500 for refurbishing a grand piano, $7,000 for bed sheets and table linens, $4,000 for a reception for trustees following Kennedy’s 1987 wedding, and $184,000 for depreciation for a seventy-two-foot yacht as part of the indirect costs for federally funded research.181

In response to the audit, Stanford withdrew requests for reimbursement totaling $1.35 million as unallowable and inappropriate costs. Stanford’s federal funds were cut by $18 million per year.