Compared to private industry contractors and federal laboratories, universities receive less from the federal government to cover costs indirectly related to research, according to a study commissioned by research university associations.

Indirect costs can include building maintenance, utilities and compliance with patient safety regulations. Currently, individual colleges and universities negotiate reimbursement rates with federal agencies, but the Trump administration has sought unsuccessfully to cap funding for indirect costs at 15 percent of the research grant. Federal courts have blocked those efforts, and a coalition of higher ed associations have since proposed their own model to change how the government funds research.

The Association of American Universities (AAU) and the COGR commissioned Attain Partners, a consulting firm, to conduct the study in part to dispel confusion about the current approach to funding indirect costs.

“It is important to note that the government’s approach to indirect cost accounting and reimbursement for universities and nonprofit research organizations is different than its approach for other entities conducting federally sponsored research,” the report states. “This fact has contributed to the resulting confusion—and that confusion, in turn, is now imperiling the funding needed for America’s research institutions to continue performing groundbreaking research that improves health, saves lives, and nourishes America’s innovation ecosystem.”

One key goal of the study was to ascertain how indirect cost rates and reimbursement policies at universities compare to other research entities. Ultimately, the indirect cost rates weren’t comparable with private industry because policies differed. However, because private companies aren’t subject to the same rate caps as universities, “the effective reimbursement rate for universities’ actual indirect costs is likely lower than that of private industry,” according to the report. 

Universities also pay upfront to cover operational costs related to research and only receive some of the money back via reimbursement. Such losses totaled $7.06 billion in fiscal year 2024, according to AAU.

Another key question for the report was whether private and public universities have different reimbursement policies. Private universities tend to have higher reimbursement rates than public ones, leading some to suggest “private universities are gaming the indirect cost system to obtain more funding than other institutions or that are reasonable and necessary costs to conduct research,” according to the report.

But the authors were quick to counter that idea, saying in the report that that belief “misrepresents the actual reasons for differences in rates between various universities.” Instead, the rate differences stem from location and the type of research being conducted, among other factors. Biomedical research and engineering tend to result in higher reimbursement rates.