The document addresses concerns raised by federal officials and the media regarding the proportion of National Institutes of Health (NIH) grant funding allocated to indirect, or facilities and administrative (F&A), costs—often referred to as overhead. It clarifies that both direct and indirect costs together represent the full expenses of conducting federally sponsored research. F&A costs encompass essential infrastructure, compliance, and administrative support necessary to enable scientific research, such as facility maintenance, utilities, data storage, safety compliance, financial management, and regulatory reporting. These costs are reimbursed through federally negotiated rates, which have remained stable at below 28% of total federal research awards over the past two decades, despite increasing regulatory demands. Universities often incur substantial unreimbursed F&A costs and cost sharing obligations, highlighting that federal funding does not fully cover these outlays.
The summary also notes the difference between federal and non-federal sponsors regarding overhead reimbursement: private foundations and charities commonly place additional limits on F&A, resulting in institutions accepting unreimbursed costs to pursue joint research aims. While critics and some members of Congress have questioned whether indirect cost reimbursement encourages administrative growth or unnecessary construction of research space, the document emphasizes that institutions bear the full risk for infrastructure investment and are only reimbursed for space used in federal research. Regulatory demands have increased sharply since the 1990s, necessitating more administrative compliance without a corresponding rise in F&A rates. Ultimately, the document asserts that the partnership model between the federal government and research institutions is efficient; it enables the government to support a broad range of high-quality research without managing its own extensive research infrastructure, while institutions accept significant financial risks and responsibilities beyond the support provided by federal funds.
