This document, authored by the Council on Governmental Relations (COGR), provides an in-depth analysis of the funding model for federally sponsored research in the United States, with a particular focus on Facilities and Administrative (F&A) cost reimbursement. The paper outlines the historical evolution and current rationale for F&A reimbursement, demonstrating that these costs are real, necessary expenditures for supporting research infrastructure and compliance. It explains that the system has developed over decades to ensure fair, transparent, and efficient allocation of both direct and indirect (F&A) costs, utilizing rigorous federal oversight, periodic audits, and carefully negotiated rates tailored to each institution’s actual cost structure. Importantly, the document dispels common misconceptions, emphasizing that F&A charges are neither profit nor extraneous “taxes,” but rather reimbursement for legitimate institutional expenses vital to the conduct of research.
The analysis also highlights the challenges posed by longstanding limitations, particularly the federal 26% cap on administrative cost reimbursement, which now fails to reflect the increasing regulatory and compliance burdens faced by universities. The paper argues that artificially low reimbursement rates compel institutions to subsidize federal research significantly, which is unsustainable and threatens the robustness of the U.S. research enterprise. It discusses alternative funding models, ultimately concluding that the current system, despite its imperfections, is efficient, equitable, and central to the nation’s scientific and economic leadership. The report calls for continuous improvement through clearer policies, greater transparency, regulatory reform, and inclusive dialogue among stakeholders. Overall, it asserts that maintaining a fair and properly structured F&A reimbursement system is critical to sustaining excellence and innovation in U.S. research.
