Image credit: Ruben Balderas.
Image credit: Ruben Balderas.

Graduate students are just one cog in the academic research machine; a machine that must interlock a series of individual parts to create an environment that can support independent and novel research. As part of an ever-imposing machine, it is easy to forget that this whole system needs to be constantly maintained, improved, and managed. Practically, at the end of the day, who pays for the hospital or university lab space, the renovations, the excessive power usage, the variable heating, the administrative staff, the regulatory offices, and safety training needed to keep research running? Really, what keeps this research machine lubricated and running?

This is where the indirect costs of research come into play. Indirect costs are those expenses associated with the institute at large and not any particular research project. Maintenance of facilities, purchase of shared equipment, and staffing of radiation safety offices are just a small part of the total indirect costs incurred by hospitals, non-profit, and university research institutes. All the benefits you come to expect from working in a large and renowned organization are paid for through indirect research costs. The money needed to support these enterprises is not trivial, so who ends up paying for these invaluable resources?
Unsurprisingly, this depends on your institute and policies. If based within a university or hospital, costs can be recovered from tuition fees, private donations, and of course federal and provincial grants. Independent non-profit institutes rely more heavily on direct government funding to keep themselves afloat. Smaller institutions generally receive more government funds when compared to larger universities, which are expected to defray costs through other revenue streams.

Before I continue, let me be clear that not all grants are made equal. Operating grants from different sources may have different requirements for covering overhead costs. Tri-agency operating grants from CIHR, NSERC, and SSHR cannot be used to cover indirect costs. Instead, the Government of Canada instituted the Indirect Costs program in 2003 to distribute a separate pool of money and cover the overhead costs of research. Money is awarded on based on a tiered system as a percentage of an institute’s total federal funding credit. For example, an institution receiving more than $6 million in tri-agency grants – which represents most major academic research institutions in Canada – will receive an additional 18% of the awarded amount to cover the indirect costs of research. At U of T, a 2010 report estimated the true overhead cost of research to be 52%, leaving 34% of the difference as an unmet cost to the University. In 2013, the Indirect Cost program distributed $332 million to 126 postsecondary institutions. Similar rules apply to NIH-funded grants, which distributed $5.7 billion in 2013 to cover indirect costs. Canadian researchers holding NIH grants receive an additional 8% of the award amount for indirect costs.

Other granting agencies, however, may not underwrite this cost and so the money must come directly from the awarded grant. This is the case in the US for National Science Foundation-awarded grants, so an operating grant of $1 million dollars will likely result in the researcher only seeing 60% of that amount. Most institutions in Canada have a negotiated rate that typically ranges from 20 to 40% of the awarded grant but some smaller institutions in the United States, like the La Jolla Infectious Disease Institute, have claimed up 95%, the highest rate in the country. In case you’re wondering, this rate would definitely apply to funding awarded from industrial grants or private donations.

If these numbers seem excessively large to you, you are not alone. Some have argued that the bureaucracy of research has become overly bloated. This is especially evident in medical school associated laboratories that need to pass countless ethics and regulatory boards before research can be done. All of these regulatory hurdles need to be processed and covered by the increasing overhead costs of research. Others have argued that unwarranted and unfunded renovations are driving up costs. Just take a gander at the new and mostly empty MaRS research tower that was built primarily with provincial dollars. That money, a $317 million dollar bailout used to finish construction, could have been directed towards operational grants.

On the other hand, research is an expensive business and in fact, indirect costs are not completely covered by government sources. Universities rely on rising tuition fees and private donations to bridge that gap in funding so that we, as graduate students, can continue to access Nature articles online.

For me, the most striking part of indirect cost reimbursement is that it is dependent on recruiting and retaining capable and well-funded principal investigators. The system puts a lot of pressure on scientists to acquire as much money as possible, even if a large portion of that money is not spent on the direct act of research. All things considered, the services supported through indirect funds are essential to research. As large as they may seem, they are a necessary and often ignored part of doing research.

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Yuriy Baglaenko

Founding Editor
Yuriy is a 4th year PhD student studying the suppression of autoimmunity at the University of Toronto. He is an avid musician with an at-home amateur recording studio and a mediocre intramural volleyball player.
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