Federal Grant Accountability ActThis bill limits the indirect costs that are allowable under federal research awards to institutions of higher education (IHEs). (Generally, indirect costs represent expenses that are not specific to a research project but are needed to maintain the infrastructure and administrative support for federally funded research.)Specifically, the total amount of indirect costs allowable under a federal research award may not exceed the total amount of indirect costs allowable under private research awards. The Office of Management and Budget must determine the average indirect cost rate applicable to private research awards.Additionally, the Government Accountability Office must study and report on (1) the indirect cost rates allowable under federal research awards to IHEs, including awards made by the National Institutes of Health, the National Science Foundation, and other such organizations; and (2) the indirect cost rates allowable under private research awards to IHEs.
If enacted, HB 420 will have substantial implications on existing financial regulations governing federal research awards. Institutions of higher education will need to reassess their indirect cost accounting practices to comply with the new limitations. The bill mandates that the Director of the Office of Management and Budget will determine the average indirect cost rate applied to private research awards, which will serve as the benchmark for federal awards. This alignment could lead to reduced indirect cost reimbursements for some institutions, particularly those that charge rates significantly higher than the newly established limits.
House Bill 420, titled the 'Federal Grant Accountability Act', seeks to impose limitations on the amount of indirect costs that institutions of higher education can charge under federal research awards. The intent behind the bill is to create a more standardized approach to funding that parallels rates used in private research awards. By capping indirect costs to the average rate of private research awards, the bill aims to ensure accountability and transparency in the use of federal research funds allocated to educational institutions. This measure brings important changes to funding mechanisms affecting higher education institutions and researchers that depend heavily on federal grants.
Debate around HB 420 may arise from stakeholders in the higher education sector who might view the legislation as overly restrictive. Critics may argue that imposing lower indirect cost caps could hamper the ability of universities to support essential administrative and operational functions tied to research initiatives, which may include funding for diversity, equity, and inclusion efforts. Furthermore, there may be concerns about whether these limitations could affect the competitiveness of institutions in securing federal research grants, potentially putting some universities at a disadvantage relative to others that could rely more heavily on private funding.