The document is a memorandum prepared by James D. Luther, Associate Vice President of Finance & Compliance Officer at Duke University, in response to requests from the House Committee on Science, Space, and Technology regarding the May 24, 2017 hearing on the overhead costs of research. The memo encompasses corrections to the verbatim transcript, as well as detailed responses to committee members’ questions concerning the financial and operational challenges faced by universities in supporting federally funded research.
Luther’s responses highlight the growing imbalance between the actual indirect costs (facilities and administrative, or F&A) incurred by universities and the portions reimbursed by federal agencies. He clarifies that universities subsidize a significant share of research—about 24% of total academic R&D, a sizeable part of which stems from unreimbursed overhead costs. Despite critics’ comparisons to lower international or philanthropic indirect cost rates, Luther emphasizes that differing funding structures and institutional obligations make direct comparisons unreliable. The memo underscores the university community’s commitment to transparency but expresses concern that the current funding model is unsustainable, especially as regulatory demands and unfunded mandates have substantially increased since the imposition of the 26% administrative cap in 1991. Further cuts or a shift to a flat indirect cost reimbursement rate, Luther argues, would likely force universities to reduce the scope and diversity of their research portfolios, resulting in negative consequences for scientific progress, workforce training, and the overall strength of the research enterprise in the U.S. The document ultimately urges policymakers to recognize the critical partnership between universities and the federal government, warning that undermining the current model risks diminishing America’s global leadership in research and innovation.
