NIH slashes overhead payments for research, sparking outrage - Move to cut indirect cost rate to 15% (which is normal rate) - February 7, 2025

[sharon sanders]

NIH slashes overhead payments for research, sparking outrage

Move to cut indirect cost rate to 15% could cost universities billions of dollars

• 7 Feb 2025
• 9:42 PM ET
• ByDavid Malakoff

The National Institutes of Health plans to severely cut the percentage of its grant money that can be used for overhead costs rather than research.In a Friday night move that quickly drew howls of protest from the U.S. biomedical research community, President Donald Trump’s administration today announced it is immediately reducing by roughly half the so-called indirect cost payments that the National Institutes of Health (NIH) makes to universities, hospitals, and research institutes to help cover facilities and administrative costs.

A 15% indirect cost rate will now apply to all new and existing grants, NIH said in a memo from its Director’s office. Typically, about 30% of an average NIH grant to an institution is earmarked for indirect costs, although some universities get higher rates. In 2023, NIH, the world’s largest funder of biomedical research, spent nearly $9 billion on indirect costs; the change would likely leave research institutions needing to find billions of dollars from other sources to support laboratories, students, and staff.

more...https://www.science.org/content/arti...arking-outrage

[sharon sanders]

One standard measurement of a non-profit's effectiveness is to measure program and overhead expenditures as a percentage of spending. My long term understanding is that a 15% overhead rate of total expenditures is one indicator of a fairly well-run operation. It is a matter of scale. A small business has fixed costs spread over a smaller base so they might run 10%-30% overhead rate.

"A 2001 survey conducted by the BBB Wise Giving Alliance found that among potential donors, the overhead ratio and financial transparency are more important to giving decisions than the success of the organization’s programs. Survey results indicated that more than half of Americans believe that NFPs should have overhead rates of less than 20 percent."

https://publications.aaahq.org/jogna/article/13/1/56/12789/Good-Governance-in-Not-for-Profit-Organizations-A

[Pathfinder]

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[sharon sanders]

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If those overhead rates above are accurate, imho, it is a travesty.

Way back in my previous life I was a financial analyst for a large non-profit, and in particular, I was an overhead analyst. Again, tiny operations will have a distorted indirect/direct ratio because of their tiny base - but the groups above - not.

I would love to see the explanations for those overhead rates charged to the US taxpayer.