National Institutes of Health Extramural Research Grants: Oversight of Cost Reimbursements to Universities Page: 1 of 18
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AGAO
Accountability * Integrity * Reliability
United States Government Accountability Office
Washington, DC 20548
January 31, 2007
The Honorable Tom Coburn, M.D.
Ranking Minority Member
Subcommittee on Federal Financial Management,
Government Information, and International Security
Committee on Homeland Security and Governmental Affairs
United States Senate
Subject: National Institutes of Health Extramural Research Grants:
Oversight of Cost Reimbursements to Universities
Dear Senator Coburn:
The Department of Health and Human Services' (HHS) National Institutes of Health (NIH) is
the nation's leader in conducting and sponsoring biomedical research. More than 80 percent
of NIH's budget, which totaled over $28 billion in fiscal year 2006, is used to support
extramural research, which is primarily conducted at over 500 universities' nationwide. NIH
reimburses universities for direct costs that can be specifically attributed to research
sponsored by NIH grants, including costs for labor and materials used solely to carry out the
research. It also reimburses universities for indirect costs, which include various facility and
administrative expenses incurred by the universities for the shared support of such research.
To be reimbursed for direct and indirect costs, universities must properly identify and claim
them in accordance with federal guidance. Office of Management and Budget (OMB) Circular
No. A-212 establishes the principles for determining the types of direct and indirect costs that
are allowed to be claimed and the methods for allocating such costs to federally funded
research. Because indirect costs cannot be specifically attributed to a particular research
grant, they are charged via an indirect cost rate that is applied to the direct costs for each
grant agreement. Each university develops a proposed indirect cost rate, based on
information such as the amount of physical space used for conducting research. A
university's final indirect cost rate is generally determined by negotiating its proposed rate
with HHS's Division of Cost Allocation (DCA).3 DCA is responsible for ensuring that the final
negotiated indirect cost rate complies with OMB Circular No. A-21. Additionally, for each
university that received $25 million or more in federal funds for its most recently completed
'We are using the term university to refer to any domestic institution of higher education.
22 C.F.R. pt. 220 (2006).
30MB assigns responsibility for negotiating indirect cost rates to HHS's DCA or the Department of
Defense's Office of Naval Research, normally depending on which department provided more funds to
the educational institution over the past 3 years. According to DCA, its staff negotiates rates for more
than 90 percent of the universities that receive NIH grants.GAO-07-294R Extramural Research Grants
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United States. Government Accountability Office. National Institutes of Health Extramural Research Grants: Oversight of Cost Reimbursements to Universities, text, January 31, 2007; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc297757/m1/1/: accessed March 30, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.