Len,
I think you have compiled an admiral list of reasons why indirect costs have
historically been necessary and significant costs in the business of
sponsored research. After returning from the SRA Meeting in Seattle last
week, the NIH staff appear to be in more agreement with your dilemma than
the congressional oversight committees. Perception is a powerful tool and
it has definitely shaped what the congress and general public believe to be
the facts. One possible solution might be to re-name these costs for what
they are, eg. "Administrative and Facility Costs", for the "Indirect Cost"
name seems to imply a cost that is less than sincere or honest on the part
of the recipient institutions. The current erosion of this base has
definitely challenged the budget of every leading academic institution with
a robust research enterprise.
It is definitely interesting to hear the other point of view from the
non-federal sponsors of research. At Yale, we receive awards from private
foundations, etc. that have specified exclusions or limits on their indirect
support. It is imperative to have this information upfront, as you
mentioned, during the pre-award process. It has been understood that many
smaller foundations do not have the financial strength to include indirect
support. You have been quite correct in pointing out that post-award
requirements for technology transfer, patent rights, information disclosure,
financial and scientific reports, etc., generate real costs that were not
identified in the original proposal. Additionally, nearly all of the
"direct costs" listed in the proposal, generate a direct cost for
procurements of goods and services, expense reimbursements, personnel
payrolls, etc. I think you idea of having a forum/dialogue between
non-federal sponsoring agencies and recipient institutions of research would
help both sides of the equation!!!
Gary P. Naegel
Administrator, Department of Pharmacology
Yale School of Medicine
(203) 785-4373
xxxxxx@Maspo1.mas.yale.edu
----------
From: RESADM-L
To: Multiple recipients of list RESADM-L
Subject: Re: administrative fee
Date: Tuesday, October 18, 1994 9:27AM
"Sherry A. Marts" <xxxxxx@AOL.COM> writes:
>
>I am the research grants director for a small private foundation that
>provides grants for research on Alzheimer's disease, glaucoma, and heart
>disease and stroke.
I'm delighted to see more individuals from the sponsoring agency
side of the ledger in this group, your perspective is both
interesting and important.
>The foundation I work for does not pay indirect costs.
>The Board of Directors believe this is necessary because the money for the
>grants comes from contributions from the general public, and our
contributors
>would want all of the grant funds to go to research. I realize this is a
>perception problem, and that indirect costs are part of the cost of doing
>research, but that "indirect" or "administrative" tag is enough to set the
>BoD's teeth on edge.
Most, if not all, research institutions will accept the IDC
policies of foundations, charities and voluntary health
organizations.
They will also abide by the published policies of those agencies,
so that if your organization prohibits any administrative costs,
I doubt that you'd see too many proposals from grantees trying to
sneak one past you. The key, however, is that grantees need to
know up front what the ground rules are!
>The other reason why charities like the one I work for don't pay indirect
>costs. It is accepted practice in non-profit accounting to include such
costs
>as in-kind contributions to the charity. This means that if we give a $100K
>grant to a university and that university's indirect cost rate is 60%, we
get
>to add a $60,000 contribution to our revenue for the year.
This is fascinating! Doesn't this practice have an impact on the
amount of funding you are required to distribute annually? I was
under the impression that IRS rules require that foundations
distribute a certain percentage of their capital each year. By
including in-kind contributions (we would normally refer to such as
cost sharing) as revenue, don't you affect how much of your capital
has to be distributed?
>I want to warn against trying to hide indirect costs in a budget that is
>supposed to include only direct costs. We have run across this a few times
>and have required that the budget be re-done
>before we issued the check for the grant. If we were to find out that an
>institution had used funds from our grant for indirect or administrative
>costs, we would consider that a serious violation of the terms of the grant
>award and would take whatever action seemed appropriate, and would consider
>turning back any future applications from that institution.
I assume that somewhere in your published guidelines you would
explicitly prohibit such administrative costs as part of the
grant's budget. Correct?
>A more constructive way to address this issue would be to assemble all the
>arguments in favor of private foundations/ charities paying indirect costs.
Here goes a first attempt at this:
1. American universities and academic health centers are
experiencing
one of the most devastating economic periods in their history. The
impact of the recession of the late '80s/early '90s has resulted in
significantly reduced charitable contributions (sound familiar?),
and
the realignments of the health insurance industry have reduced
clinical
income. Thus, whereas in the past universities and health centers
could absorb certain costs by cost shifting within their own macro
budgets, the flexibility to do so is eroding faster than anyone
imagined 5 years ago. Nowadays, if our cost centers do not generate
revenue, then their value is examined constantly, and we cannot
provide
services which do not pay for themselves.
2. The American research university system was developed after WWII
as a resource which met a critical national need, and was financed
largely by the federal gov't. The infrastructure developed to
support
this research enterprise was financed through the IDC policy of the
gov't. And that infrastructure is significant. You can't run a
major research university without buildings, power, admin. services,
etc. To the best of my knowledge, the critical national need for
a continued strong research university system has not been disputed,
or debated.
3. Despite the acceptance by all sectors that this resource needs
to be maintained, the federal gov't.'s share of funding research
has (and continues to) declined. In 1985, the federal share of all
R&D expenditures in the U.S. was 46%; in 1993, it was only 42%.
(Source: NSF Science and Engineering Indicators, 1993).
4. The university share of all U.S. R&D expenditures has increased
since 1985, up from 9% to 13%.
5. Universities are rapidly approaching the point where they can
no longer afford to increase their share of supporting the
infrastructure, and either the funds to support this will have to
come from sources which were not aggressively asked to contribute
in the past, or the enterprise will begin to shrink.
6. Private supporters of research attach, for good reason, a number
of requirements on the award of grants, e.g., fiscal reports,
human and animal research clearances, etc. These services cost!
Yes, we have to provide them for federally sponsored programs
anyway, but the time may be coming when we'll no longer be able to
provide them for all grantors, only those which agree to pay for
them.
Already some institutions are accepting awards with reduced IDC
rates
if the sponsor agrees to forgo annual fiscal reports, technology
transfer limitations, etc. Maybe the time will come when
universities
will limit the human/animal subjects clearances only to those
grantors which agree to pay for them. I certainly hope not, but my
guess is that this question is being considered somewhere in the
U.S.
Anyway, I've spent far too much time musing here that I should, and invite
anyone else to respond to, or build upon, my comments.
Len
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Leonard P. Paplauskas Assistant Vice President for Research |
203-679-3173 University of Connecticut Health Center |
FAX 679-2670 Farmington, CT 06030-5355 |
|
xxxxxx@sun.uchc.edu |
xxxxxx@neuron.uchc.edu |
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