New indirect costs program fails to address funding gap between large and small universities

The federal government has quietly launched a $231.3-million fund to help academia further offset rising indirect costs of research, but the new program retains a sliding formula that leaves Canada’s largest research universities with a smaller slice of the funding pie. Groups like the U15 Group of Canadian Research Universities are optimistic, however, that the new fund will produce the evidence they need to convince government to fund 25% of indirect costs for all academic institutions, rising to 40% over time.

The Tri-agency Incremental Project Grants (IPG) program has not yet been officially announced, but applications from 29 institutions were received on Feb. 13, with an initial $28.75 million expected to be awarded in March. The full $231.3 million will be dispersed over five years, gradually increasing to a top rate of $58.8 million per year ongoing.

The $231.3 million was announced in Budget 2018 as a new stream of the Research Support Fund (RSF), which has an annual budget of $369 million. Large universities like Toronto and McGill are disappointed that the IPG, like the RSF, continues to use a sliding formula that sees the biggest research institutions receiving just one-fifth of their indirect costs. Smaller universities are paid from the fund first and can expect to have 40-80% of their indirect costs reimbursed. What monies remain are then distributed on a pro rata basis to larger research-intensive institutions, which may only see about 20% of their indirect costs covered.

The IPG will provide project-based funding in four priority areas: innovation and commercialization activities; facilities renewal, including deferred maintenance; information resources, including digital resources, open access and databases; and equity, diversity, and inclusion, such as for staffing an EDI centre of expertise. The Tri-agency Institutional Program Secretariat (TIPS), which administers the program, said eligible categories may be revised in the future to reflect changing needs and priorities.

[rs_quote credit="Dr. Vivek Goel" source="VP Research and Innovation, U15 Group of Canadian Research Universities"]From our perspective there’s no value, and in fact there’s additional work.[/rs_quote]

“Government officials believe that allocating all future incremental RSF funding to the IPG program will address the negative bias that is built into the current RSF formula. It will not, unless the government stops using the current allocation formula for the first $7 million of eligible grants,” U15 executive director Dr. Gilles Patry wrote to the group’s Research Committee in a Feb. 5 memo, a copy of which was obtained by RE$EARCH MONEY.

Dr. Vivek Goel, University of Toronto's VP Research and Innovation, says the IPG formula is the same as the RSF’s, but with additional accountability requirements.

“From our perspective there’s no value, and in fact there’s additional work,” said Goel in an interview with RE$EARCH MONEY, adding that audits from U.S. funding agencies estimate it costs University of Toronto 56 cents in indirect costs for every dollar of research funding it receives. “Our rate [from the RSF] hovers around 22% and it’s been as low as 17%.” Last year, U of T’s share was 19.2%, according to the U15.

Public universities in the U.S. have about 53% of their indirect costs covered, while Japan and the European Union have flat rates of 30% and 25% respectively. A universal 25% reimbursement rate for indirect costs does apply to certain federal programs, including Canada Research Chairs, Canada Excellence Research Chairs, Canada First Research Excellence Fund and the recently launched New Frontiers in Research Fund.

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Goel acknowledges the “laudable intention” to build research capacity at smaller universities, but stresses that all institutions should be supported equitably. “If you’re going to do a program that is based around development for smaller institutions or for regional development purposes, you should be explicit for that.”

Canada’s Fundamental Science Review (FSR) described the RSF approach as “formulaic and arbitrary,” and argued that “larger institutions are perversely penalized for success.” The panel recommended gradually raising the RSF’s reimbursement rate to 40% for all institutions with more than $7 million per year of eligible funding.

Similar concerns around funding the full cost of research, particularly for large institutions, were raised in 2014 during a 10-year evaluation of the indirect costs program, and as far back as the 1960s, notably the Bladen Commission report (Financing Higher Education in Canada, 1965), and the Macdonald report in 1969.

U15 lobbyists have met with senior federal officials 58 times over the past year, with one of their top priorities being a 25% funding floor.

Patry told RE$EARCH MONEY that there should be an increase in the average funding rate, as well as a funding floor of 25% to be equitable, with graduated increases to 40% over the next five to 10 years. “That is in our recommendation [to government]… We understand this is going to take a while.”

In its pre-Budget brief to Finance Canada, the U15 says this funding gap compromises the quality of research by hindering the ability of large universities to attract and retain top faculty and international students, and invest in commercialization and partnership opportunities.

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It also requires universities to tap other budgets to make up the shortfalls. This may include deferring maintenance and new equipment purchases, or cutting back on library services, intellectual property protection or technology transfer.

“So we’re either not doing things or are taking away from other services we could be providing as an institution,” says Goel.

Dr. Martha Crago, Vice-Principal of Research and Innovation at McGill says her Innovation and Partnerships Office is “very badly funded.” More funding, she stresses, would mean more resources to help small companies scale.

Looking ahead to 2020-21

Starting in 2019-20, IPG grant recipients will be required to provide quantitative and qualitative data, including detailed objectives and outcomes. “We need to better understand how the government’s investments in the RSF are being spent and what outcomes are being achieved,” TIPS media relations stated in an email to RE$EARCH MONEY. “Past evaluations of the RSF have noted challenges with regards to reporting on RSF spending and impact of these investments.”

The additional reporting requirements could also strengthen the U15’s case for funding parity.

“Where is the money used, what is it used for and how is it benefiting researchers? … In all honestly, [having that information] may help us tell our story a little better about indirect costs,” says Patry, who declined to comment specifically on the IPG until it’s been publicly announced.

A clearer value proposition will also increase the visibility of both the RSF and IPG, which together comprise the single largest annual program within the Tri-council.

“I think governments tend to think that universities don’t handle this money carefully … but I have to tell you the reporting they ask of us is very slim. If [the government] fears we’re not using the money well, then ask us to demonstrate the use of those funds better,” says Crago, who chairs the U15 Research Committee and was an FSR panel member.

Patry doubts there will be any additional funding for indirect costs in Budget 2019, set to be tabled March 19. However, he’s optimistic 2020-21 could bring an increase in the average funding floor to 25%. That would cost government about $43 million more a year, he says.

“That’s a tough sell. We recognize that.”

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