Sneak Preview: GAO Advises NIH To Evaluate Indirect Cost Growth

November 27, 2013 | By admin | Post a Comment

xgran_bookshot(The following was excerpted from an article in the Federal Grants Management Handbook.) As the amount of federal reimbursement sought by research colleges and universities for indirect costs continues to rise, the Government Accountability Office is calling for the National Institutes of Health to assess the impact of these costs on its mission, and how continued future increases in indirect costs could threaten grant funding for research.

Although NIH reimbursement for direct costs remains greater than for indirect costs, indirect cost reimbursements from NIH to universities grew at a faster rate than did direct costs from federal fiscal year 2003 to FY 2012. Indirect costs increased 16.9 percent, from about $3.9 billion to $4.6 billion, while direct costs rose at 11.7 percent, from about $10.3 billion to $11.5 billion. In addition, from FY 2006 to FY 2012, annual reimbursements for indirect costs increased relative to direct costs in five of the seven years.

NIH funding in general rose during this period. The increase in direct and indirect costs corresponds with NIH’s greater appropriations for extramural research conducted at universities. From FY 2002-2007, NIH’s extramural research budget rose 21 percent. However, from FY 2008-2012, it continued to rise, but only 5 percent. While the increase to extramural research funding explains the increase to direct and indirect costs, there still remains the trend of indirect costs rising disproportionately to direct. Administrative indirect costs, furthermore, are capped at 26 percent while facilities indirect costs are uncapped. The increase can be directly attributed to facilities indirect costs.

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