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New TRAC guidance that applies from 2014-15 has now been published. This is hosted on the HEFCE web site on behalf of all funders. The current TRAC requirements continue to apply for TRAC reporting for the year ending 31 July 2014, but once the 2013-14 TRAC reporting is complete, the HEFCE web site will become the sole resource for TRAC as well as financial sustainability materials.

EXECUTIVE SUMMARY: INTRODUCTION TO TRAC

  1. The Overview [HYPERLINK] provides a non-technical introduction to TRAC (in Section A), a summary of the main features of TRAC (in section B) and an overview of issues surrounding sustainability (Section C). This is intended to be helpful to those in higher education institutions and elsewhere who are not directly responsible for implementing TRAC, but who need a high-level understanding of what TRAC is, why it is being implemented, and its costs, benefits, and implications for their work.

What is TRAC?

  1. TRAC is the Transparent Approach to Costing. Since 2000, TRAC has been the standard methodology used by the 165 higher education institutions (HEIs) in the UK for costing their main activities (Teaching, Research, and Other core activity), and it is increasingly informing the public funding of higher education.
  2. While it followed naturally from work done in the higher education sector in the 1990s, introducing TRAC was a government requirement. It was developed in 1999 as part of the government's Transparency Review. It was piloted during academic year 1999-2000, and implemented, progressively, from 2000-01. The Dual Support reform of research funding in 2003-04 has given further impetus (and new costing requirements) to TRAC, and further implementation work now in hand by institutions will continue for several years (until about 2008).
  3. TRAC is not a single costing method, nor does it involve prescriptive standard requirements. UK HEIs are very diverse, as are the activities to be costed, and the uses of such cost information. Much academic activity poses inherent challenges for costing - think, for example, of defining the differences between research and scholarship and teaching; or the complexities of costing heritage buildings; or of knock-for-knock arrangements with the NHS in medical schools.
  4. The strength of TRAC is that it is broad and flexible enough to accommodate all these challenges, and that it does so in a way which allows HEIs a good deal of discretion about the precise methods they use. Crucially, it does not require them to take on a much greater administrative burden, which could be associated with a requirement for "full commercial costing systems", nor does it require academic staff to complete timesheets. At the same time, TRAC has been accepted by government and the major public funders of research and teaching (chiefly the funding councils and research councils) as an appropriate and robust method for costing in higher education. Much of the funding of research is now based on TRAC costs (known as full economic costs - fEC).
  5. TRAC could also be seen as a collaboration between HEIs and their principal stakeholders and public-funding bodies. The success of the sector in implementing TRAC, and the support of the Treasury for TRAC has benefited all institutions both directly in terms of their funding, and indirectly through the confidence it has engendered in government.
  6. As David Westbury notes in his foreword, universities and colleges are not primarily businesses, but they must also be business-like in the way that they use their financial, physical and human resources. Not least because they employ considerable public funds, and costing is a requirement of government.

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Costs, benefits and implications of TRAC

  1. The information which TRAC has provided on the full long-run costs to institutions of their main publicly-funded activity has informed the funding of research with over £1bn of additional funding being provided by the government to make the UK research base sustainable (i.e. to make the existing volumes of research more secure, not to increase volumes). Notably, from 2005, the research councils will fund research projects at 80% of the TRAC full economic cost and this is a significantly higher level of funding for the same work than the previous basis of "direct costs plus 46%".
  2. More generally, TRAC has contributed to the current policy interest in sustainability of higher education, especially by highlighting the inadequate investments being made in infrastructure for teaching and research. Government has provided additional funding for capital, and all institutions are now required to take account of the full costs of their activities in their planning and management. Better cost information is of benefit to management decision-making, not the least by informing price negotiations.
  3. TRAC has introduced some new processes and activities in institutions that sit alongside the existing accounting and project management systems. The most notable of these (from an academic's perspective) are the requirements to allocate academic staff time, and to build up the cost of research projects on a full economic cost basis (fEC).
  4. Time allocation has been the most contentious issue, but is essential if HEIs are to know where their academic staff effort is being directed, and if they are to plan how these costs can be funded. The TRAC time allocation approach offers alternative options to HEIs, and does not require the use of timesheets, as in some other professions. The process of costing research project grants has built on previous research council requirements, and the new procedures should not, if efficiently organised, prove onerous. However, academic principal investigators will need additional support and training in the early days of the new system.
  5. Institutions also have to allocate non-staff costs (such as space, libraries etc) using robust methods, and to develop their own charge-out rates for space and major facilities, and for residual indirect costs. They have to maintain records on the new fEC basis, and to quality assure their own internal TRAC systems. There is also a new external QA process.
  6. A cost-benefit analysis of TRAC has been discussed by the Higher Education Regulation Review Group (HERRG). This suggests that the cost of implementing TRAC for a typical large multi-faculty research university is of the order of £400-500k per annum over a few years, chiefly in central administrative departments. (The uncertainty is due to the flexibility allowed in TRAC. Some institutions will implement TRAC as part of a broader strategy for improved management information and resource allocation in the institution, others may treat it more as a stand-alone system.) Such a university will also now see increased research funding resulting from full economic costing at an annual level of at least 10-20 times this administrative cost. Costs (and benefits) will be significantly smaller for other types of institution.
  7. HERRG agreed that "despite the burdens of implementing this new system, TRAC had delivered significant benefits to the HE sector".

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Core principles

  1. TRAC has to satisfy a number of different objectives and stakeholders, and to be applicable across all activities carried out by a large and diverse group of institutions, with a minimum of additional administrative effort. TRAC has had a broader impact on the HE sector than just as a costing method.
  2. This breadth and flexibility is a great strength, but it can make TRAC appear more complex than a less flexible or comprehensive system would be. Much of its apparent complexity flows from the multiple activities and streams of accountability of HEIs, and the links between costing and funding (or pricing) for publicly-funded teaching and research.
  3. Different people may not all have the same things in mind when they refer to TRAC. And it will be perceived differently in different institutions. This Overview should help those not involved with TRAC on a daily basis to understand what TRAC is (and is not), and its implications for their institutions.
  4. TRAC will need to continue to evolve. The methods used to cost teaching, and post-graduate research students, for example, may need to be further developed if funding of those activities is more closely linked to costs.
  5. However, the core of TRAC, which underpins all of its development, is a firm set of rather simple principles and processes. The most important principles are:
    • Materiality
    • Costs are fair and reasonably stated
    • Flexibility and choice of methods
    • Consistency of costing treatment
    • Auditability
  6. Ten high-level "costing standards" define the processes that must be used to prepare annual TRAC costs. These were given in the Transparency Review report in 1999, and have remained essentially unchanged since. To these have been added two new high-level requirements (fEC costing of research projects; annual reporting of income). These are all described further through a set of minimum requirements.
  7. The way in that TRAC is implemented is important. Every HEI has a TRAC Project Manager who typically has attended a number of briefing and training sessions; has been involved in benchmarking with peer institutions as an aid to TRAC implementation; and has access to a regionally-based self-help group, and to a national help-desk, as well as to the TRAC guidance. The guidance has evolved significantly since the first Volume was produced during the pilot year, but it is now all consolidated into a single searchable web-based guide for those involved in implementation of TRAC.
  8. TRAC has shown itself to be a robust and useful tool. This is due to a great part to the great assistance which has been provided by those in the pilot and other HEIs who have worked with the JCPSG in developing the guidance, and also by the funding councils, research councils, government departments, and other stakeholders who have all contributed to the current status of TRAC.


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