SYMPTOM:
A Flag object shows up in Desktop with a name like NewSearch Folder like in the below image.

These show up immediately underneath the project and if expanded show lists of varying objects. They also only show up after a Project Merge occurred where some issue happened during the merge.
CAUSE:
One known cause for this is that a Project Merge was attempted with the project in question as the source project. During this Project Merge either Developer, the Intelligence Server or the database server crashed. What happens is that these objects are temporarily created during the process of Project Merge and are supposed to be deleted once it completes. They are integral to the process of a Project Merge.
ACTION:
These objects are associated with a failed Project Merge and can be safely deleted without having any effect on the project in question.