The document discusses the structure and significance of costs associated with federally funded academic research, distinguishing between direct costs—such as personnel, supplies, equipment, and travel—and facilities and administrative (F&A) costs, which encompass the operational expenses necessary to maintain research infrastructure and comply with regulatory requirements. F&A, also known as indirect costs, cover a range of essential services and resources, including research facilities, utilities, compliance, and administration. These costs are partially reimbursed by the federal government through negotiated F&A rates, which are governed by Office of Management and Budget (OMB) regulations, ensuring a standardized approach across institutions. Notably, F&A rates have remained stable at under 28% of total federal award costs over the past two decades, despite increasing compliance burdens, and institutions continue to subsidize a substantial portion of research expenditures, with their own funds constituting over 24% of higher education R&D activity.
The document also highlights the complexities and disparities in F&A reimbursement among different sponsors. Federal awards impose stricter rules and generally lower F&A recovery compared to contracts with industry or other non-federal sponsors, whose rates and allowable costs may differ. Foundations and certain federal programs often cap F&A reimbursement, further contributing to institutions’ unreimbursed expenses. Despite these financial constraints and differences from private industry, which faces fewer limitations, academic institutions remain committed partners in the nation’s research enterprise, providing critical resources and investing heavily in research. This collaborative effort between the federal government and research institutions has positioned the United States as a global leader in scientific innovation, generating significant economic, occupational, and healthcare advancements that benefit the broader society.
