Sponsored Research Indirect Costs: A Single-Site Case Study of Public Research University STEM Faculty Members' Perspectives

By Gossman, Susan | The Qualitative Report, October 2019 | Go to article overview

Sponsored Research Indirect Costs: A Single-Site Case Study of Public Research University STEM Faculty Members' Perspectives


Gossman, Susan, The Qualitative Report


Purpose of Study

Higher education institutions are knowledge-creating, knowledge-disseminating enterprises. Basic research, also called fundamental or pure research, is driven by curiosity and interest in a scientific question. It is the lifeblood of knowledge creation and scientific inquiry. Basic research in science, technology, engineering and mathematics (STEM) has provided the knowledge undergirding applied research advances of the past 50 years, including vaccines, cancer therapies, global positioning systems and the world wide web (National Research Council, 2014). Public and private universities conduct 60 percent of all basic research in the United States. Federal government laboratories and non-profit and corporate research institutes conduct the remainder (National Science Foundation, National Center for Science and Engineering Statistics [NCSES], 2016).

More than half the funding for basic research at U.S. research universities is from the United States federal government, of which 80% is for the STEM fields. Higher education institutions themselves fund 20% of basic research out of their own internal resources. The balance of basic research funding comes from state governments, non-profit foundations, and corporate entities (NCSES, 2016). Faculty at research universities serve as the principal investigators who propose the research projects to sponsoring agencies, and who then manage the project and the grant funds on behalf of the university once an award is made to the institution.

Indirect cost recovery is the reimbursement of overhead costs incurred while conducting research for the federal government and other sponsors. Overhead costs include all the basic facilities and administrative infrastructure to run an organization, such as utilities, maintenance, payroll and purchasing. For nearly 60 years, American research universities, both public and private, have negotiated agreements with the federal government authorizing each research institution's rate of indirect cost recovery. As state government appropriations for higher education have shrunk and tuition revenue is frequently capped, public research universities are increasingly financially dependent on external sponsored research support and its related indirect cost recovery. At major public research universities, on average, sponsored research represents 25% of revenue support (typically 60 to 80 percent federally funded), with the remainder of revenue coming from tuition (23%) and state appropriations (17%). Auxiliary enterprises (such as bookstores) at 17% and private gifts at 11%, along with a mix of other revenues at 7%, make up the balance (Council on Government Relations [COGR], 2014). Funding for basic research operations is not solely a concern in the United States, as the European Union also notes the problem of inadequate overhead cost recovery for research programs (European Commission, 2016; The Royal Society, 2015).

During the past 20 years the effective, or actual, rate of indirect cost recovery has been roughly half the negotiated rate (COGR, 2014). This difference translates into billions in annual lost revenue for institutions of higher education. The National Science Foundation reported public research universities lost $3.4 billion in unrecovered indirect costs in fiscal year 2015 (NCSES, 2016). Most of the under-recovery is the result of sponsor-imposed restrictions on the allowable percentage of indirect cost recovery that can be applied to research funding, such as legislatively mandated caps on recovery incorporated in appropriations and statutory language; exclusions mandated in the federal Office of Management and Budget (2014) Uniform Guidance for Grants and Agreements, such as the prohibition on applying indirect costs to tuition or fellowships and the cap on administrative costs; non-federal entity restrictions on indirect cost recovery, typically seen with state government and non-profit sponsors; and internal institutional waivers on indirect costs requested by faculty for individual projects. …

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