University Research

Federal agencies obligated about $12 billion to universities and colleges for scientific research in fiscal year 1994. The government pays for direct costs specifically identified with a particular research project as well as indirect costs for administrative and facilities expenses. For every dollar spent on the direct costs of university research, the government spends another 50 cents to cover its share of universities' indirect costs. This report assesses the effect of (1) October 1991 revisions to Office of Management and Budget Circular A-21 that primarily set a 26-percent cap on federal reimbursements to universities for three components of their administrative costs and (2) July 1993 revisions that further clarified and tightened indirect cost accounting procedures, including the specification that the remission of tuition for graduate students working on federally funded research be treated as a direct cost. GAO identifies alternatives for further revising Circular A-21's cost principles to contain the growth of indirect costs, improve consistency in the way that universities treat costs, and streamline indirect cost accounting procedures.

GAO found that: (1) the 26-percent administrative cost cap affected 69 to 82 of the 140 universities surveyed and reduced annual administrative costs reimbursements by about $104 million; (2) the cap also lead to more uniform indirect cost rates among the universities; (3) the 1991 revisions eliminated or reduced some previously allowable indirect costs; (4) the effects of the 1993 revisions are not fully known because federal agencies are implementing them through renegotiated multiyear rate agreements; (5) the change in the treatment of tuition remission costs could reduce the number of science and engineering doctoral candidates at 4 universities; (6) OMB has proposed several revisions to its indirect cost principles to control indirect cost growth and improve accounting procedures; and (7) federal and university officials oppose a total cap on indirect cost rates because it could adversely affect the universities' ability to provide modern laboratory facilities and equipment.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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