As Iāve previously shared, in early February, a major policy shift sent a jolt through the scientific community; a proposed 15% cap on the āindirect costā reimbursement from the National Institutes of Health (NIH). Other agencies quickly followed suit, with some specifically targeting higher education institutions. While the goal may have been to curb spending, implementing such a drastic cap without broader reform would have dire consequences for the American research landscape and reduce our global competitiveness.
We believe there’s a better way forward ā one that combines accountability while adequately supporting lifesaving, economy-driving research. It is imperative to be good stewards of federal resources while being transparent about our spending, recognizing that transparency is the key to building trust.
For the past several months, I’ve had the honor of serving on the Joint Associations Committee on Indirect Costs (JAG). Our mission: to develop a new model that replaces the existing, decades-old system that is currently under federal scrutiny. After many hours of research and discussion with stakeholders from across the U.S., we have developed a new option that we believe is more transparent, equitable, and better suited for 21st-century science.
The proposed Financial Accountability in Research (FAIR) model is designed to ensure continued American leadership in innovation by providing unprecedented accountability and transparency. The current federally negotiated indirect rate is an aggregate measure that gives an institution a single indirect reimbursement ārateā. Unlike the current model, the FAIR model funds the actual costs of research and links reimbursement costs directly to the research being performed. This means that research occurring in specialized and expensive facilities will cost more than research occurring in less specialized space.
This approach clarifies the use of federal funds by tracking costs in specific, allowable categories and aligning a project’s budget directly with the type of research being conducted. It sheds light on how institutions allocate and recover research-related costs. The model is flexible and designed to work for research institutions of all sizes and types.
The JAG has continued to work in close partnership with policy and decision makers in D.C., and the proposed model has been vetted by institutions across the country. Now, I’d like to answer some of the most frequently asked questions I’ve received on our work:
1. Why do we need to replace the current model?
Ongoing efforts from Congress to implement caps on federal indirect research cost reimbursements have been challenged over the past five decades. These caps pose a significant threat to the research enterprise if they do not adequately support research. The momentum for change is strong and without question change is afoot. To this end, the JAG was formed to create an alternative model that ensures the future of American science.
The JAGās new FAIR model is designed to adequately support the actual costs of research and reduce the inefficiencies of the legacy model. It also introduces important transparency measures. Taxpayers, researchers, administrators, and the government will be able to see in black-and-white how costs are spent. In doing so, institutions can demonstrate where their research dollars go and ensure the public that federal research funds donāt support non-research activity. The approach serves to demystify the research funding process and build trust with all stakeholders.
2. Are we not already transparent about our research spending?
In short, yes! We believe Carolina to be a leader among peers in our accounting transparency. We have made our all-funds operating budget publicly available for the last three years. Our budget is approved by our board of trustees and the UNC System Office, ensuring our federal indirect funding directly supports the costs of research.
We have spent years developing and implementing systems to enhance efficiency and transparency across our research enterprise. We seek to always be productive partners in identifying new models of transparency and accountability for our sponsors, including state and federal government.
3. People are confused by the FAIR model, why is it so complicated?
Change doesnāt come easily, especially in complex systems. The FAIR model emphasizes greater transparency and a project-centric view of spending that is quite different from our current model. This would require new systems for collecting and reporting data to demonstrate how funds are being used.
It will take time to develop these new systems and practices. That is why the FAIR model proposes a 2-year period that allows institutions time to implement these changes. The added benefit of being able to demonstrate to the public how we are spending our money and calculating our costs is well worth it. As a public institution, transparency is paramount.
4. Will this new model be hard to implement?
While it will take time to set up the appropriate systems, Carolina is well positioned to implement the FAIR model or whatever model is selected to move forward. As always, the Office of the Vice Chancellor for Research (OVCR) will create the systems to support our faculty.
5. Do you anticipate the FAIR being adopted verbatim?
The FAIR model is a proposed model that we are delivering to Congress and the Office of Management and Budget. Although we have been in close communication with both during the development of the FAIR model, we anticipate modifications of the model (or even alternatives) before it is adopted. Indeed, there will certainly be a period for public comment once it is formally released.
6. As an investigator, would I see differences in how my grants are administered under the FAIR model?
The FAIR model will still include direct costs that principal investigators put into their budgets and it will reallocate some costs that were formerly categorized as indirect costs to direct costs. Some of those costs are in categories like institutional facilities that will be managed by the institution as they always have been. If a component of grant administration happens at the department-level, those costs would be supported directly. It is critical to note that the FAIR model uses āTotal Costs,ā so anything that is moved to āDirect Costsā should not affect the total award.
We anticipate that a system to support the FAIR model would streamline the budgeting process and make use of drop-down menus or templates for specific types of costs. The OVCR would identify and manage that process.
The goal of the FAIR model is to simplify the federal research reimbursement process over time by replacing the complex, time-consuming indirect rate negotiation with a more streamlined and transparent system. While the initial implementation would be complex, the long-term benefits of a more predictable and auditable system are the main drivers behind the proposal.
As a scientist myself, I recognize the great privilege that it is to be entrusted with federal dollars to conduct research. I am proud of the research that happens at our great university and I am incredibly grateful for the federal funding we receive.
The continued investment in federally funded research drives almost all our lifesaving therapies, devices, products, and technologies. This investment has ensured our global leadership, our health, national security, and economic prosperity. The FAIR model moves us closer to a future where American science continues to lead the world.