We at the University of Central Florida have had this "Windfall"
situation occur a number of times in all types of recearch
contracts and grants.  The State of Florida Auditor has cited us
on several occasions for this situation.  Since the federal
government usually uses the state auditor in lieu of making
separate audits of our books, I suppose the federal government
gets those reports too.    We have taken a strong position on
such activity and have required faculty (Principal Investigators)
to expend at least 90% of the project funding in support of the
activities defined in the statement of work.  If such is not the
case, the Division of Sponsored Research reserves the right to
take the residual dollars and remit them to the general Sponsored
Research Trust Fund (for the benefit of all research at the
university).  This is a great disincentive to the PI not to
expend all or most of the funding on the planned work.  In a
state university, the auditor can make the argument that if the
work was accomplished without using the $ allocated for the
activity, than the assumption can be made that the work was
completed on "state" time.  Hence the state is illegally
underwriting the costs of a private industry or corporation.  The
PI could be considered an intregal part of this illicit activity!
Makes the faculty member stop and think!