Assessment estimates cost of federal regulation compliance at Vanderbilt

Vanderbilt University has released the results of an internal assessment that estimates it spends approximately $146 million a year complying with federal regulations.

“Federal regulation of higher education and research is critical to ensuring taxpayer dollars are spent responsibly and that health and safety are rigorously protected,” Brett Sweet, vice chancellor for finance and chief financial officer, said. “We conducted this assessment because, until now, data about the cost of complying with these regulations has largely been missing from conversations on this topic. We wanted to fully understand the role that complying with these regulations plays in the overall cost of higher education and research.”

The assessment, conducted for Vanderbilt by the Boston Consulting Group in the fall of 2014, used interviews with and surveys of faculty and staff, university financial records and a review of existing regulations to estimate costs for the 2013-2014 fiscal year. The review examined the costs of compliance with higher education regulations, research-related regulations and general regulations applying to all sectors to get a full picture.

Research-related compliance costs were found to be the largest contributors to overall federal compliance costs, accounting for approximately $117 million. Complying with higher education-specific regulations and maintaining accreditations cost approximately $14 million, while complying with general regulations that apply to all sectors, such as human resources, immigration, finance, etc., accounted for an additional $14 million. The combined cost represents approximately 11 percent of the university’s overall expenses, excluding its medical center’s patient care and clinical operations.

Seventy percent of the overall costs reside within individual academic departments, which is one reason the overall costs have been difficult to pin down in the past. Faculty time comprises over half of these decentralized costs. The remaining 30 percent of costs are centralized. Compliance in research areas accounts for 17 percent of relevant expenditures, compared to 4 percent in non- research areas.

“Determining the costs of regulations governing higher education and research is challenging and complex, yet vital to understanding college and university finances,” said Tobin Smith, the Association of American Universities’ vice president for policy. “Vanderbilt is to be commended for its work, which is one of the few substantive efforts to date to measure this significant expense.”

While the study does not include cost estimates for compliance related to patient care or clinical operations at Vanderbilt University Medical Center, it does include compliance costs for the education and research-related activities of the School of Medicine and School of Nursing.

Costs associated with maintaining both regional and specialized or programmatic accreditation, estimated to be approximately $9 million in 2013-2014, were included in this study. Although not expressly required by federal regulations, these costs have been included because regional accreditation,  and some programmatic/specialized accreditations, are required for access to certain federal dollars, including federal financial aid, while other programmatic accreditation is required for professional licensure.

The assessment’s findings were cited in a report released Feb. 12 from the Task Force on Government Regulation of Higher Education. The task force, appointed by a bipartisan group of senators on the Senate education committee, was co-chaired by Vanderbilt University Chancellor Nicholas S. Zeppos and University System of Maryland Chancellor William E. Kirwan, both of whom testified before Congress on the task force report Feb. 24.