Transparent and accountable stewardship of federal research sponsorship

June 12, 2025

by Penny Gordon-Larsen

As our leaders in Congress and the executive branch consider changes to federal funding, including a 15% rate cap for federal agency indirect costs, it is critically important to consider reform that goes beyond slashing percentages across the board and maintains transparent accountability to our sponsors and the general public.

Do we need reform? Yes. While there has been transparency in setting reimbursement rates through the federal negotiation process, the documentation of how funds are spent has not been required, so there has been less transparency in how institutions use federal indirect reimbursement funds once they are received. Furthermore, the process for federal funding in general is overly complex, resulting in policymakers and taxpayers having a hard time understanding and supporting federal indirect reimbursement.

The entire purpose of supporting indirect costs is to benefit the public and the nation. Vannevar Bush, an American scientist who led the U.S. Office of Scientific Research and Development, conceived the current federal-academic partnership model in 1945 following World War II based on the premise that federal investment in research was essential for setting a course for national progress and economic growth. He was correct.

Today, American science leads the world, driven by top-ranked universities, a robust research ecosystem that attracts global talent, and exceptional success in translating research into therapeutics and commercial products. By investing in this infrastructure, U.S. taxpayers benefit from the rewards of decades of discovery science that makes its way into commercial products, goods, and services.

Take for example, research on saliva of a desert lizard, the Gila monster. Some might ask why in the world taxpayers would support this. Follow this research for decades and you see the real-world benefit. By studying the biological mechanisms this lizard uses to regulate blood sugar over long fasting periods, researchers developed the miraculous GLP-1 diabetes and weight loss drugs that have revolutionized health care today. This is just one example of the benefits of investing in the broader research ecosystem.

Sadly, this shared investment in university research and its public benefit has been clouded by a historical lack of transparency and clarity. But we cannot lose sight of the greater purpose. Much needed reform must ensure that changes do not jeopardize our global leadership in research, rigorous competition, and progress in science and innovation.

What’s wrong with the current model?

We suffer from a cumbersome and confusing model which met the needs decades ago but is mismatched to today’s complex regulatory and compliance frameworks. This complexity also leads to a significant administrative burden for universities in the burdensome rate negotiation process that results in a single reimbursement rate at each institution. The one-size-fits-all approach fails to account for the true expenses of conducting research, which under-reimburses the actual costs of research.

Take for example research administration (the “A” portion of Facilities & Administrative costs) expenses which are capped at 26%. Mandatory federal regulatory requirements have ballooned over the past decade to the point where actual costs of compliance and other regulatory activities far exceed that cap. Under the current model, we do not recover those costs.

The same is true for the facilities portion. Carrying out the cutting-edge research that makes American science the top in the world requires state-of-the-art equipment. At our current rate, we do not fully recover the costs that we put into our facilities and equipment.

A universal indirect reimbursement cap of 15% would jeopardize our future

Unlike many other countries, the U.S. relies on universities to conduct research in the national interest. Universities, not the government, bear the risk of investment in infrastructure necessary to support federal research. They make upfront investments in facilities, equipment, and personnel that enable their scientists to compete for and execute federal grants. This highly competitive merit-based grant system has driven scientific progress and innovation and the excellence of our universities. These are also investments in the next generation as our future workforce is trained within the infrastructure of the country’s colleges and universities.

For this vital partnership to thrive, the federal government must cover the true costs of research. A 15% universal cap to reimbursements of these costs will not do it. Without adequate reimbursement, universities like ours would struggle to maintain necessary infrastructure, jeopardizing the entire research enterprise and hindering scientific progress. The downstream impacts slow lifesaving progress, reduce job creation, and ultimately harm human health and our nation’s economic future.

A public university’s responsibility

As a public university, Carolina benefits from sustained investments by state and federal government over decades — benefits that enable us to cultivate significant return on investment for our communities. Our commitment to public service is unwavering, and we recognize that our partnership with the citizens of our state is fundamental to our mission and impact.

Transparency and accountability are some of our core values. At UNC-Chapel Hill, we have made our all-funds operating budget publicly available for the last three years. Our budget is approved by our boards of trustees and governors, 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 are productive partners in identifying new models of transparency and accountability for our sponsors, including state and federal government.

The way forward

A simpler, more transparent model is needed for the effective use of taxpayer-supported research cost reimbursements. Leading this charge, the Joint Associations Group on Indirect Costs, a collaboration between several national academic, governmental, and medical organizations, is focused on addressing issues and identifying solutions for federal indirect cost reform.

On Thursday, June 12th, the Joint Associations Group will present two models that showcase options for reform centered on accuracy and transparency. These models would allow taxpayers and government officials to track the use of federal indirect funds by any federal grant recipient. As a member of the group, I look forward to presenting that work and sharing it with our research community.

Let us not lose sight of the fundamental value that public research institutions bring to North Carolina and our nation. By embracing transparency and continuing to invest wisely, we can ensure a brighter, healthier, and more prosperous future for all. We stand ready to work collaboratively with our partners at the state and federal government to strengthen our systems and continue delivering exceptional value to the people of our great country.