The National Institutes of Health claimed proposed changes to federal funding will save taxpayers billions. In response, Chancellor Robert Jones called the changes “fundamentally antithetical to what was in law,” and the University estimated it would’ve been responsible for an extra $82.3 million had the changes taken place in fiscal year 2024.
President Donald Trump has tasked the newly created Department of Government Efficiency to save money for the American people by lowering federal spending. One initiative they’ve undertaken to reach this goal is imposing funding limits on government-sponsored research grants.
In this article, The Daily Illini breaks down federal grants: how researchers apply, their funding structures and payments, why DOGE wants to change them and how these changes would affect the University. While not exhaustive, this overview is intended to provide a general understanding of the issue and may not capture every detail or exception in the process.
Funding types
When applying for a grant, a researcher must take into consideration the budget, scope and requirements of the granting agency to maximize their odds of being selected for the fund. The researcher will also provide the granting agency a detailed list of what they plan to spend the funds on.
Get The Daily Illini in your inbox!
“If I have a project that needs funding … I’m going to think about some funders who could support that project, and then I’m going to look and see if they have any open calls for applications,” said Kasia Szremski, associate director of the Center for Latin American & Caribbean Studies.
Within her department, Szremski creates spending outlines for grant applications. In terms of budget, University grants from the federal government are split into two cost types: direct and indirect.
Direct costs make up the bulk of research expenses and cover costs directly associated with the research itself. This can include laboratory equipment, salaries and stipends for researchers or travel expenses to present findings.
Indirect costs are the expenses to support the research and are composed of two parts: facilities and administrative. Facilities funds are used for building construction, maintenance and utilities, while administrative costs cover payroll and paperwork, among other things.
So-called F&A costs are calculated as a percentage rate of the direct costs. The F&A cost rate is negotiated by the University and the federal government every few years and differs based on whether the research is taking place on campus.
If the F&A rate for a grant is set at the University’s federally negotiated 58.6%, then for each dollar planned to be spent towards direct costs, another 58.6 cents will have to be budgeted for F&A.
Two conditions determine how a researcher can divide a grant between direct and F&A costs. First, the two costs need to add up to the total grant money offered. Second, the F&A cost has to be 58.6% of the direct cost.
For example, if a researcher is awarded a $100,000 grant with a 58.6% indirect cost rate, they can spend roughly $62,500 on direct costs, and approximately $37,500 will go towards F&A costs. This is because the two numbers add to $100,000 and $37,500 is roughly 58.6% of $62,500.
In some cases, F&A costs are added on top of the grant’s initially listed funds. In those cases, the researcher can spend the full grant price, and the University receives extra money for indirect costs based on their negotiated rates.
In this cost structure, a grant listed with a $100,000 direct cost budget and a 58.6% indirect cost rate would grant the University an additional $58,600 for F&A costs.
The federal government usually doesn’t distribute the grant’s full award right away. Instead, they periodically reimburse the University’s direct and indirect spending up to that point.
The money reimbursed for direct costs must go to the budgeted items that a researcher has already turned in as part of their grant, while the reimbursement for indirect costs is much more flexible.
The government’s claim
Since February, DOGE has been trying to standardize indirect cost rates across government agency grants to a maximum cap of 15% of direct costs. So far, three government agencies have seen such a limit imposed on higher education institutions. This includes the NIH, Department of Energy and National Science Foundation.
When the DOE announced their attempt to limit current and future F&A rates to 15% in April, they projected the change to save over $405 million annually. DOGE justified the temporarily blocked proposal by saying taxpayers should be supporting more direct and less F&A research costs.
“The purpose of Department of Energy funding to colleges and universities is to support scientific research – not foot the bill for administrative costs and facility upgrades,” Secretary of Energy Chris Wright wrote in an April 11 policy memorandum.
On the contrary, the University argues that current F&A rates are necessary to sustain research. In February, a 22-state coalition sued the NIH over its attempt to impose a 15% indirect cost rate limit.
“Without this (F&A) reimbursement, we could not support research and scholarly activities in the way that we now do,” said Kelvin Droegemeier, professor in LAS and special advisor to the chancellor for science and policy, during an April webinar.
If DOGE is successful in standardizing F&A rates nationwide to 15% of direct costs, the University will be responsible for making up the difference in ensuring these people and facilities are still paid for.
The University has estimated that if this 15% limit on modified total direct costs had been in place for all research in the 2024 fiscal year, it would have been responsible for more than $82.3 million previously covered by the federal government.
“We operate on such (a) razor-thin margin at any public institution that you take out one piece, there’s no way to fill that back in,” Szremski said. “There’s just no way.”
