…and it’s not about curing cancer!
Elite Colleges Flout Federal Rules, Inflate Overhead Costs on Government Grants
The Department of Government Efficiency (DOGE), tasked with rooting out waste in federal spending, has uncovered a troubling pattern of excessive overhead and administrative costs charged by elite colleges on government contracts and grants.
Federal rules, specifically the Office of Management and Budget’s (OMB) Uniform Guidance (2 CFR Part 200), allow institutions to claim up to 15% of modified total direct costs for facilities and administrative (F&A) expenses—commonly known as indirect or overhead costs. These costs cover shared expenses like utilities, lab maintenance, and administrative support that cannot be directly tied to a specific research project.
Yet, DOGE’s findings reveal that many prestigious universities, particularly Ivy League and other elite institutions, have been charging rates far exceeding this cap, siphoning off taxpayer dollars meant for scientific research.
Indirect costs are a necessary part of federally funded research, ensuring universities can maintain the infrastructure to conduct cutting-edge studies. The federal government, the largest sponsor of academic research, spent nearly $60 billion on higher education R&D in fiscal year 2023, with institutions like Harvard, Yale, and MIT commanding significant shares. Historically, universities negotiate their F&A rates with federal agencies like the Department of Health and Human Services (HHS) or the Department of Defense’s Office of Naval Research, based on actual costs incurred. These negotiated rates are meant to reflect real expenses while adhering to federal cost principles.
However, DOGE’s investigation found that elite colleges routinely secure rates well above the 15% benchmark. For example, Harvard’s (Veritas Motto literally means ‘Truth’) negotiated indirect cost rate stood at 69% of direct costs, Yale’s at 67%, and MIT’s at 59% in 2023. Even public universities like the University of California system charged rates between 40% and 54%. These figures starkly contrast with the 15% cap referenced in recent policy shifts by agencies like the National Institutes of Health (NIH), which attempted to standardize indirect cost rate at 15%, for its grants in February 2025, citing the need to maximize direct research funding. While a federal judge halted NIH’s cap due to legal challenges, the Department of Energy (DOE) followed suit in April 2025, imposing a 20% limit and projecting $405 million in annual taxpayer savings.
The disparity between the 15% rule and the rates charged by elite institutions raises serious questions about stewardship of public funds. In 2023, NIH alone spent $35 billion on nearly 50,000 grants, with $9 billion allocated to indirect costs. At an average rate of 27–28% across all recipients, the agency noted that some institutions charged rates exceeding 50%. For a $100 million grant, a 55% indirect cost rate yields $55 million in overhead, compared to just $15 million at the proposed 15% cap. The difference—$40 million per year for a single institution—could fund additional researchers, equipment, or grants. DOGE’s report highlights how elite colleges’ high rates divert funds from the lab to administrative bloat.
Universities argue these costs reflect the complexity of their research environments. Maintaining state-of-the-art labs, complying with federal regulations, and supporting administrative staff are not cheap. They also note that they bear significant unreimbursed expenses, contributing $27.7 billion of their own funds to academic R&D in 2023, including $6.8 billion in unrecovered indirect costs. Yet, critics point out that private foundations, like the Gates Foundation, cap their indirect cost reimbursements at 10–15%, and universities willingly accept these grants. This discrepancy suggests institutions can operate at lower rates when incentivized, undermining claims that high overhead is essential for research quality.
The issue is compounded by administrative growth in higher education. Between 1993 and 2007, administrative spending at leading universities outpaced instructional spending, with some schools employing nearly nine non-faculty staff for every faculty member. At elite institutions like Johns Hopkins and Caltech, non-faculty employees outnumber faculty by seven to eight times. This bureaucratic bloat, fueled partly by federal grants, contributes to inflated indirect cost rates, as universities bundle expenses like executive salaries and facility upgrades into their F&A pools.
DOGE’s findings also expose inconsistencies in federal oversight. While OMB rules require that indirect cost rates be based solely on research-related expenses, excluding costs tied to education or athletics, audits have been insufficient. The Government Accountability Office (GAO) noted in 2010 that policies for reimbursing indirect costs needed updating, citing variations in rates driven by factors like institutional prestige or negotiating power. HHS, responsible for auditing most university rates, increased scrutiny in 2003 due to concerns over compliance, but elite colleges continue to secure outsized reimbursements.
The push for reform faces resistance. When NIH announced its 15% cap, a coalition of 22 state attorneys general and universities sued, arguing the policy violated existing contracts and congressional mandates. A federal judge in Boston issued a temporary restraining order in February 2025, and similar legal challenges have stalled DOE’s cap. Universities warn that lower rates could force layoffs, lab closures, or reduced research capacity, particularly at institutions with high-cost infrastructures. However, DOGE counters that taxpayers should not subsidize administrative excess, especially when less wealthy institutions manage with lower rates.
The debate over indirect costs strikes at the heart of federal research funding. Elite colleges, with their vast endowments—Harvard’s alone exceeds $50 billion—have the resources to absorb some overhead costs, yet they lean heavily on taxpayer dollars. DOGE’s findings underscore the need for stricter enforcement of the 15% rule, greater transparency in rate negotiations, and a reevaluation of how federal grants are structured. Without reform, the public will continue to fund university bureaucracies at the expense of scientific progress.