Waste of the Day: Universities Pile Up Billions in Research Overhead Costs

Topline: The federal government gives billions of dollars in research grants to universities every year, but not all of it directly funds scientific inquiry. Most universities enjoy contractually negotiated overhead rates of 50% to 60%, allowing them to use grant funds on staffing, building maintenance, security and more.

Universities bill the government for overhead, far removed from actual research

That means for every dollar universities receive in research funding, they get an additional 50 to 60 cents for overhead.

Open the Books identified five universities — University of Michigan-Ann Arbor, University of Virginia, University of North Carolina-Chapel Hill, Rutgers University and University of Illinois-Urbana Champaign — that collectively received $25.1 billion in research grants from 2013 to 2023. An estimated $8.6 billion of it was spent on overhead, based on the universities’ publicly-available average overhead rates.

Those figures don’t include $1.5 billion in federal grants that UVA received 2019-2023. That’s incomplete data that doesn’t include earlier years’ grants nor the university’s overhead rate, which other universities post on their website.

While receiving grants, the other four universities added 26,650 new employees to their taxpayer-funded payrolls from 2013 to 2024, open records requests show.

Key facts: The University of Michigan-Ann Arbor received $9.4 billion in research funding, of which an estimated $3.2 billion was spent on overhead.

Michigan’s staff headcount grew by 11,836, but most were not professors, records show. Fewer than 1,500 of the new staff had the title “professor” or “lecturer.” Michigan only added about 9,000 students in the same time period.

Rutgers and UI-Urbana

Rutgers added only 3,800 students, but that did not stop the school from boosting its staff headcount by 10,283. That means for every added student, Rutgers hired almost three new employees, records show. Only 2,500 of the new staff were teachers.

At the same time, Rutgers received an estimated $1.4 billion in overhead money.

University of Illinois-Urbana Champaign added 2,031 staff while also taking in $1.4 billion in overhead. UNC-Chapel Hill hired 2,500 employees while bringing in $2.6 billion in overhead.

Most of the grant funds came from the Department of Health and Human Services and the National Science Foundation.

All four university systems have endowments of more than $2 billion. The University of Michigan system’s endowment is worth $21.2 billion.

Search all federal, state and local salaries and vendor spending with the world’s largest government spending database at OpenTheBooks.com.

How do universities get away with this?

Background: Universities do not have to specify what their overhead funds are spent on, making it impossible to determine exactly how many staff members were hired directly using overhead funds. Some of the new staff members would likely have been hired using other funding, even if overhead was not available.

However, a 2022 report from the Heritage Foundation found a statistical correlation between a university’s overhead funding and the number of its Diversity, Equity and Inclusion staff. On average, increasing a university’s overhead costs by $100 million was associated with the hiring of 15.5 DEI staff. Heritage concluded that 25% of colleges’ DEI positions “would not exist were it not for the cross-subsidy from taxpayers.”

Summary: President Donald Trump has made attempts to cap university overhead rates at 15%, but federal judges have blocked the move, and the 2026 federal budget bars him from doing so. Taxpayers will continue to subsidize massive amounts of overhead, all in the name of science.

The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com

This article was originally published by RealClearInvestigations and made available via RealClearWire.