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Abstract Research universities rely heavily on external funding to advance knowledge and generate economic growth. In the USA, tens of billions of dollars are spent each year on research and development with the federal government contributing over half of these funds. Yet a decline in relative federal funding highlights the role of other funders and their varying contractual terms. Specifically, nonfederal funders provide lower recovery of indirect costs. Using project-level university-sponsored research administrative records from four institutions, we examine indirect cost recovery. We find significant variation in the amount of indirect funding recovered—both across and within funders, as well as to different academic fields within a university. The distribution of sponsors in the overall research funding portfolio also impacts indirect cost recovery. The recovery variation has important implications for the sustainability and cross-subsidization of the university research enterprise. Together, our results show where universities are under-recovering indirect costs.