The Report of the Working Group on The Cost of Doing Business, prepared by the Council on Governmental Relations (COGR), provides a detailed analysis of the escalating compliance costs faced by U.S. universities conducting federally funded research during the period 2000–2005. The report highlights how increased federal regulations have led to substantial new administrative and operational expenses for universities. However, the administrative component of the federally reimbursed facilities & administrative (F&A) cost rate remains capped, resulting in significant under-recovery of actual compliance costs—estimated between $0.7 and $1.5 billion annually for all universities. These restrictions force institutions to divert funds from research activities to cover unfunded compliance mandates, which, as demonstrated through a sample of 25 leading research institutions, amounted to an average of $16.5 million per institution over the six-year period, with extrapolations suggesting a national impact exceeding $1.2 billion for the top 100 institutions.
The study meticulously documents the nature and scope of these incremental compliance costs, with universities reporting substantial expenditures arising from expanded or new regulations in areas such as human subjects protection, hazardous waste disposal, conflict of interest management, Medicare billing, Homeland Security, and the Health Insurance Portability and Accountability Act (HIPAA). Case studies within the report illustrate the operational complexity and resource intensiveness of implementing compliance programs. The analysis shows that, despite universities' recognition of the societal importance of compliance, the financial burden threatens the sustainability of the research enterprise, especially in the context of broader economic hardships and insufficient federal reimbursement policies. The report calls for a comprehensive reevaluation of federal cost recovery policies, recommending measures such as removing the administrative cost cap, ensuring full reimbursement of negotiated F&A rates, and minimizing non-essential regulatory burdens. Without such reforms, the growing compliance costs risk undermining the nation’s research capacity and the very partnership between research universities and the federal government.
