In the intricate dance of higher education finance in the United States, universities juggle multiple funding sources, with federal grants and private foundations playing pivotal roles. However, the allocation of funds, particularly for indirect costs, reveals a complex narrative where universities might be accused of using financial strategies to not only secure their financial health, but also to influence the behavior of researchers and faculty through various perks. Universities strategically manage these funds, often instilling a sense of urgency or panic to ensure continuous federal support, while critics argue that this system could be seen as a form of "laundering" federal money for non-research benefits.
Indirect costs, also known as Facilities and Administrative (F&A) costs, include expenses like utilities, administrative salaries, and building maintenance. These are costs not directly attributable to any one research project but are necessary for the operation of the research environment. Federal funding, through agencies like the National Institutes of Health (NIH) or the National Science Foundation (NSF), typically covers a significant portion of these costs, often allowing for rates up to 70% of direct costs. In contrast, private foundations usually fund these costs at much lower rates or not at all, focusing primarily on direct costs associated with specific research projects.
For instance, while federal grants might reimburse universities for substantial indirect costs, private foundations often have policies against paying these overhead costs, leaving universities to absorb these expenses or find alternative funding sources. This discrepancy leads universities to rely heavily on federal money, where indirect cost recovery is more assured.
Harvard has been noted for using indirect cost recoveries to fund luxurious office renovations for department heads and deans. For instance, in 2024, funds were allegedly used to renovate the dean's suite in one of its business schools, including high-end furniture and art, which critics argue does little to advance research but rather enhances administrative comfort and prestige.
There have been instances where Harvard faculty have been sent to international conferences with little direct research benefit. These trips are often justified under the umbrella of "professional development," but they are seen by some as more of a perk than a necessity, paid for with federal indirect cost funds.
UC Berkeley has a program where part of the indirect costs from federal grants subsidizes faculty housing. While this benefits faculty retention and morale, critics argue it diverts funds meant for research infrastructure into what could be considered personal benefits for faculty. Funds have reportedly been used to support high-profile cultural events, like concerts or art exhibitions, which, while enhancing the campus's cultural atmosphere, do not directly contribute to research
Universities, aware of their dependency on federal dollars, sometimes employ tactics that could be perceived as spreading panic or urgency among stakeholders to keep the funding flowing. This involves highlighting the detrimental effects on research and education if federal funding were reduced, such as potential job cuts, reduced research capacity, and the inability to maintain essential infrastructure. Such narratives serve to pressure policymakers into maintaining or increasing federal support.
An example can be seen in the case of Stanford University, where after the NIH announced substantial cuts to indirect cost reimbursements in early 2025, there was a swift reaction from university officials and researchers. They publicly expressed concerns about the implications for research, potentially leading to layoffs and the cancellation of pivotal studies, thus urging immediate legislative action to reverse or mitigate these cuts.
Critics of the current funding model argue that universities might be using federal grants not just for research but as a means to funnel money into other aspects of university life, essentially "laundering" these funds. This involves directing parts of the federal grants towards perks or non-essential expenditures that benefit faculty or administration, thereby ensuring their loyalty or cooperation in maintaining the status quo of federal funding.
Critics of Cornell University have pointed out that the university has utilized indirect cost reimbursements to fund lavish faculty retreats, international travel for non-research purposes, and even upgrades to administrative offices, suggesting these perks serve as incentives for faculty to secure more federal grants.
At Vanderbilt University, there have been instances where indirect costs have allegedly supported non-academic endeavors, like enhancing campus aesthetics or funding less transparent administrative projects, which in turn could be seen as perks for those in charge of securing funding.
The University of Texas System has been criticized for using federal funds to bolster its athletic programs under the guise of indirect costs, where the benefits seem to lean more towards the institution's prestige rather than direct research outcomes.
Johns Hopkins has received multiple large awards from the United States Agency for International Development (USAID), including like a $300 million award to the Johns Hopkins Center for Communication Programs (CCP) to encourage healthy behaviors in developing countries. The project uses communication, behavioral economics, and human-centered design. Also a $39.5 million award to the Bloomberg School of Public Health to improve physical rehabilitation services in low- and middle-income countries and another $200 million award to a Johns Hopkins Medicine-led consortium to strengthen tuberculosis research in countries with high TB burdens. The project aims to improve TB detection, treatment, and prevention, is active in over 40 countries and was extended in 2021. The project was funded by the Leahy War Victims Fund (LWVF) and aims to transfer knowledge and capacity to local, regional, and national governments, health institutions, and support organizations.
The dynamics of funding in American universities reveal a system where the pursuit of research excellence is intertwined with financial strategies that ensure institutional survival and growth. While private foundations contribute significantly less to indirect costs, the reliance on federal funding has led to practices where universities might be seen as using these funds in ways that extend beyond research. The strategic use of panic to secure federal money and the potential "laundering" of funds into perks for researchers or administrators highlight a need for more transparent and equitable funding models. This would not only ensure that taxpayer money is used most effectively for scientific advancement but also maintain the integrity of academic institutions. However, until such reforms are implemented, the current system will continue to be a point of contention and analysis in the discourse on higher education funding.
Editorial comments expressed in this column are the sole opinion of the writer.
