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Underrecovery

Underrecovery Refinement and Implementation Committee (RIC) 6

Committee Members

Jon Gruber (Chair), Angie Belcher, John Donnelley, Ron Hasseltine, Danielle Khoury, Laura Kiessling, Lisa Schwallie, Charles Stewart, and James Nutter (Staff)

Abstract

RIC 6 proposes the creation of an Underrecovery Solutions Commission (URSC) to answer the key questions around underrecovery and to propose a robust and transparent approach for the future funding of underrecovery at MIT. The membership of the URSC will include a chair from the central administration, experts on the underrecovery process, and representation from each MIT school.

Research is the lifeblood of MIT, and research carried out at MIT has made the world a better place for more than a century. But the funding of research has changed dramatically over the past several decades, with a dramatic shift from government grants to other sources. This shift poses a fundamental challenge: government and industry grants have traditionally provided funding to cover the accurate indirect costs of research, many foundations and other not-for-profit sources do not. The result is increasing underrecovery of these indirect costs, a portion of which MIT asks DLCs and Principal Investigators to fund from their discretionary resources. Many DLCs and PIs lack sufficient discretionary funds to under-write these indirect costs.

This changing mix of funding and the challenges it brings have created a rising burden of financing at MIT. This burden has been met in various ways over the years. The current system relies on a negotiated mix of departmental, school and central MIT funding. That mix varies by department and by school. Moreover, many faculty members feel that MIT constructs high “hassle costs” for them in obtaining funding for these indirect costs on foundation and non-for-profit organization grants. They therefore do not pursue valuable research opportunities.

In practice, almost all of the requests made by departments and schools for assistance with funding of underrecovery costs are ultimately approved and are paid for through a combination of central funds (VPR and Provost funds) and departmental or school discretionary funds. But the path to this funding is winding, burdensome, and leaves no one satisfied. This stands in stark contrast to perceptions of our peers and competitors, who are thought to be much more supportive of funding the shortfalls in indirect costs, not requiring funding of it, but, rather absorbing it within available central resources.

Background on Research Funding at MIT

Our report includes a detailed overview of research funding at MIT. We begin by highlighting key details of the existing system, including the nature of direct and indirect costs of research and the challenging environment posed by a rising share of funding from sources with low indirect cost rates. We provide a simplified overview of the highly obscured underrecovery process, including the differential sharing of cost burdens across departments, schools, and the VPR; the complicated process involved; and key differences from other schools. And we highlight a variety of problems with the existing system, including: time and stress costs to faculty; time and burden for administrators, a lack of transparency; inequities across departments; and limitations on available discretionary funding.

Next Step: The Underrecovery Solutions Commission

We propose the creation of an Underrecovery Solutions Commission (URSC) to answer the key questions around underrecovery and to propose a robust and transparent approach for the future funding of underrecovery at MIT. The membership of the URSC would include a chair from central administration, experts on the underrecovery process, and representation from each school. The URSC would be given three charges.

The first would be to ask—and answer—the hard questions around underrecovery, including:

  • What limitations, if any, should there be on submissions of foundation and nonprofit grants?
  • What disincentives/incentives are appropriate to encourage higher indirect cost grants?
  • What more can MIT do to increase indirect cost rates from funders?
  • What more, if anything, should MIT do to increase fundraising for underrecovery?
  • How, if at all, should MIT try to shift the line between direct costs and indirect costs?
  • Where should the preponderance of underrecovery lie? Should underrecovery be fully centralized, rest entirely in the departments, or remain diffuse as it Is now?
  • How should underrecovery be tracked and funded? On a project-by-project basis as it is now? In aggregate, as many of our peers do? Or somewhere in between?
  • Should the allocation of underrecovery resources vary based the demands the research places on Institute resources?
  • How should the allocation of underrecovery funding reflect ability to pay?

The second charge is to learn from other institutions. Given the complicated and overwhelming nature of this problem, and its inherent correlation with how peer institute budgets work, open-ended surveys and interviews alone will not bring us closer to understanding the pros and cons of these alternative approaches. The URSC should pose a set of specific questions, focused first on the sources of sponsored research funding and the direct and indirect costs paid by each, and then on the underrecovery process, including how the process operates and any differentiation by either funding source or by recipient.

Finally, the URSC should make a series of recommendations. To kick-start this process, we make a series of recommendations that we think should be incorporated into the URSC mandate:

  • A no-hassle pilot managed centrally through VPR: MIT should designate key priorities areas for which there will be automatic approval of funding regardless of indirect costs rates through a centralized process. This would be funded on a pilot basis for three years using a relatively small portion of total underrecovery funds
  • Underrecovery funding should be regularized into the Institute budget under a five-year transition process that would require a $4.9 million incremental rise to the budget yearly.
  • There should be a transparent explanation of underrecovery that is used to educated faculty and students and to remove unnecessary barriers to seeking non-government funding.
  • There should be a mini-campaign targeted to loosening the demands on unrestricted funds at the Institute.
  • There should be a thorough review of opportunities to maximize direct costs.

We propose a timeline for implementing our recommendations, beginning with the establishment of the URSC by the end of 2021, incorporation of additional underrecovery funding into the budget beginning FY2023, an education campaign for school year 2022–23, and a full set of recommendations by June 30, 2023.