Imagine a massive, complex research university as a bustling city. Now, think about the costs of keeping that city running: maintaining infrastructure, providing utilities, employing a workforce, and so on. That’s essentially what indirect, or facilities and administrative (F&A) reimbursement costs provide.
As I covered in last month’s blog, these are costs that reimburse universities for the payments they make to cover the expenses of supporting a research ecosystem. These reimbursements support the incredible return on investment of university research to the communities that they serve. They are absolutely essential for ensuring that a not-for-profit, public institution like UNC-Chapel Hill can carry out research, provide educational opportunities for students, and serve the public.
F&A costs are shared investments that the federal government makes to ensure our global competitiveness and leadership in science and innovations that save and transform lives, protect and defend our national security, feed our nation, and more. But universities cannot take these investments for granted. While I can only speak for UNC-Chapel Hill, we hold deep commitment to ensuring the highest return on investment for the incredible support provided by American taxpayers.
For this reason, we take on challenges that have led to the economic development of our region, which is now a leader among the nation’s life sciences and biotechnology industry centers. And our deep appreciation of these investments guides our approach to transparency and accountability. As a public institution, we recognize our responsibility to be exemplary stewards of these funds that are so critical to supporting the research infrastructure that makes scientific discoveries possible.
There are significant misunderstandings about the nature of these reimbursements – the costs of research administration chief among them. While the tangible aspects of conducting research are often visible, the ‘behind-the-scenes’ research administrative support is equally crucial and heavily regulated. Let’s delve into these specific costs to provide a clearer picture.
What Research F&A Costs Include
Modern research requires specialized labs, advanced equipment, and reliable utilities. These are the laboratory buildings and shared equipment that support cutting-edge science, and the operations, utilities, and maintenance of those buildings. Think of the high-performance computing clusters that analyze massive datasets, the clean rooms that are essential for nanotechnology research, or the specialized animal facilities that support biomedical studies. These are the “facilities” costs.
The “A” in F&A is “research administrative” costs, which cover the behind-the-scenes costs that keep the research engine running smoothly and ensure that we adhere to the vast regulatory and compliance structures that the federal government requires of us. This includes essential functions like:
- Supporting the research enterprise:
- Research administrative support functions, such as accounting, human resources, and IT are essential for the smooth operation of the research enterprise. F&A reimburses the university to ensure that these functions have the resources they need to support researchers.
- Navigating the complexities of federally funded research:
- Managing research grants is a complex process. Universities need skilled administrators to handle required paperwork and ensure compliance with regulations, proper financial management, data management, privacy protection, registration and reporting of clinical trials, and public access to research findings. These administrators are essential for maximizing the impact of research funding.
- Safety and compliance:
- Research environments must adhere to strict safety regulations. F&A reimbursement equips laboratories with proper ventilation, fire suppression systems, and hazardous waste disposal facilities. This is not just about protecting researchers; it’s about ensuring the integrity and reliability of the research itself.
- Ensuring ethical and regulatory compliance:
- Research must adhere to strict ethical and regulatory standards. F&A funding supports the offices and personnel that ensure compliance with regulations related to human subjects research, animal welfare, and biosafety. This protects the university and the public.
Regulatory Growth and Stagnant Funding
It’s important to note that research administration is deeply governed by the federal government. We are federally mandated to adhere to these requirements.
Here’s where things get interesting. There are restrictions, particularly on the research administration side, regarding how much universities can claim in indirect reimbursement. But research administration is complex and compliance is expensive – costing far more than the federal government reimburses for these cost at a cap of 26%. And we can’t put administrative costs into the direct costs of our research grants — the federal government does not allow that.
The federal government capped research administrative costs at 26% in 1991 — when mandatory regulatory requirements were a fraction of what they are today. Despite the sharp increase in regulations since then, the formula for covering these costs has remained unchanged. At UNC-Chapel Hill, nearly 50% of the indirect cost reimbursement is spent to meet these extensive federal regulatory requirements.
Source: Council on Government Relations
Another source of confusion is the model of indirect costs from the federal government versus those from private foundations — it’s like comparing apples and oranges. Private foundations (unlike the federal government) allow universities to budget items like research administration in the direct costs of their grants. They also don’t have the same mandatory regulatory requirements that the federal government has on awarded projects. All of which contribute to their lower indirect rates.
Research Administrative Costs Do Not Include General Academic Administration
Academic administration and programming that happens across schools and departments is completely separate from research administration. Only research administration costs are covered by reimbursable F&A.
Carolina takes seriously our stewardship to the federal and state governments that support our research ecosystem. We work hard to ensure that 100% of our indirect costs are used solely to support research infrastructure and support.
These shared investments in research facilities and administration are a force multiplier as they provide the ecosystem that trains Carolina students who are not directly funded from research, but who benefit greatly by being engaged in research activities in cutting-edge laboratory settings. This incredible training also comes at an affordable tuition that creates enormous value for students at our top research university.
Continuing our Commitment to Stewardship
The vitality of our nation’s research universities directly affects us all. Groundbreaking discoveries in medicine, technology, national security, agriculture, and countless other areas originate from their labs. These institutions are not just academic centers; they are economic powerhouses, fueling job creation and driving innovation. They also cultivate the next generation of scientific minds and leaders, preparing the workforce of the future with hands-on experiential learning.
Arbitrary caps on F&A costs would disproportionately harm public institutions like UNC-Chapel Hill, which serve the state and have consistently demonstrated responsible stewardship of federal and state funds. Our commitment to financial accountability and compliance has fostered robust systems that ensure the efficient allocation of resources for high-quality research that produces tangible impacts. We are eager to model what responsible stewardship of these dollars looks like.
We believe reform is essential, with accountability and transparency at its core. UNC-Chapel Hill stands ready to collaborate on the development of a modernized indirect cost model. A new model should reduce inefficiencies and duplication in mandatory regulations and harmonize them across agencies. And it must ensure that all universities uphold the same level of transparency and accountability to U.S. taxpayers, while continuing to advance lifesaving and life-improving research for the benefit of the nation.