Why are there F&A costs related to the conduct of research?

When a federal agency, foundation, or other entity provides a grant to a Duke researcher, there are certain costs that can be directly associated with the project. These direct costs support researcher salaries, graduate students, lab supplies, and equipment.

There are also costs that cannot be directly charged to a specific project because they support multiple projects. These costs, also known as Facilities & Administrative (F&A, also known as indirect costs) include laboratory space, high-speed data processing, radiation safety and hazardous waste disposal.

Think of it this way: say you are planning to cook dinner tonight. The direct costs of research would be the food – the vegetables, meat, and grains. The indirect costs, or F&A costs, are the refrigerator which keeps that food fresh; the stove, pots, and pans that will assist the cooking; and the electricity that will enable it all. Both sets of costs are necessary and essential to prepare dinner. Likewise, F&A costs are necessary and essential to the research enterprise; scientific discovery cannot go forward without them.

What are F&A costs?

F&A costs are an essential part of the total costs of research and necessary for the safe, secure, efficient conduct of research. These funds come to universities as part of externally funded research grants and reimburse the university for costs incurred to conduct federally sponsored research and, are therefore, integral to the enterprise. Moreover, F&A supports the administrative infrastructure necessary to comply with various federal rules and regulations that come with university’s receipt of federal research funds.

How are the funds broken down?

F&A costs are broken into two pieces – facilities and administrative. The federal government caps administrative costs at 26%, although major research universities incur more than this in administrative support for federally funded research. The facilities rate is uncapped and has five components: building and equipment depreciation, plant operations, libraries, and interest on debt supporting research-related capital expenditures. The facilities rate can vary considerably from one institution to the next, and many factors create the variance: for example, the costs to build and maintain research facilities in different cities, or whether state funding is already provided to build research facilities. Only facilities that are used for sponsored research are included in the rate.

What kind of costs has Duke paid that are partially covered by F&A funds?

F&A funds partially reimburse Duke for much of the additional expenses necessary to support the research mission, such as:

• Lab equipment and infrastructure: Ensuring labs have the necessary safe and practical equipment to conduct research, from fume hoods to lab benches.
• Building maintenance and operations: Providing the day-to-day upkeep of research buildings, including janitorial services, heating and electricity.
• Research safety and compliance: Supporting programs like those that manage hazardous waste disposal and enable the compliant conduct of research.
• Library infrastructure: Ensuring all researchers have access to journal subscriptions and other critical sources of information.

Why does the government provide these funds?

For many decades, the government and universities have partnered to fund vital scientific research that is in the nation’s interest. This partnership between the federal government and research institutions fuels the innovation and discovery that saves lives, improves health, expands knowledge, advances national security, and makes the United States a scientific leader on the world stage. Doing this research means incurring expenses that are beyond what universities can bear on their own, which is why the government helps cover those costs. This is a relationship that dates back before World War II.

Does the government contribution cover everything?

No. Universities such as Duke also provide financial support for research. In fact, universities are the second largest contributor to research taking place on our campuses, behind the federal government. Duke helps with these costs with revenue it raises through a variety of sources.

How much F&A does Duke receive?

The rate is re-negotiated about every four years with the federal government. Duke currently has an approved F&A rate of 61.5% to use to support F&A costs. In 2024, Duke received more than 1,700 NIH awards. The NIH proposal to reduce this funding to 15% would mean a devastating $194 million annual cut to the university.

Does Duke profit from these funds?

Absolutely not. They are partial reimbursements for costs already incurred by the university while conducting research in partnership with the federal government.

Can Duke use its endowment to make up for the loss of this money?

No. Most of Duke’s endowment is restricted to specific uses. When a donor gives Duke a gift, it is often for a specific purpose – a scholarship, a program, or to help build an important new building. These restricted gifts are memorialized in contracts called endowment or gift agreements, and they have given Duke some of its true crown jewels – like Bass Connections and the A.B. Duke Scholars program. But those funds are specified solely for those purposes. They cannot be re-purposed to cover F&A costs or fill the gap left by a massive cut to Duke’s NIH funding.

As of the end of fiscal 2023-24, about 21% of Duke’s endowment was designated for financial aid and student support; 41% for faculty and other instructional support, and 10% for other programmatic activities. The university cannot legally use those funds to support activities other than those designated by the donor.

Even if it could, Duke’s endowment is designed to support ongoing operations and not as a stop gap measure to stem severe financial bleeding. State law places restrictions on the amount of the endowment that Duke can spend each year. To maintain financial stability, Duke spends around 5% of its endowment each year. This assures the endowment complies with state law and remains sustainable, as it’s intended to support Duke’s mission forever.