Part II - TRAC Principles

Section C: Quality assurance and validation

Chapter C.6 Dispensation

1. Institutions should always have regard to materiality. Some institutions’ volume of Research activity is not of a level that, taken with the sector as a whole, requires the same degree of verification and validation for either the annual TRAC process or TRAC fEC. Dispensation allows for this.
2. Institutions with a Research income of less than £500k have dispensation on the testing and validation requirements. This means that although they should report costs, and meet TRAC requirements, they do not need to introduce a robust method of time allocation, nor a fully robust set of cost drivers. However, they may wish to use these for their own reasons.
3. Research income is defined for this purpose as total income for publicly funded research activity (Funding Councils, Research Councils, OGDs), calculated as an average over the last five years.
4. Institutions may wish to consider whether they actually want to take up dispensation, as it is likely that they will wish to use robust costing information internally. Funding Councils are also interested in the application of TRAC to costing Teaching. Although dispensations are currently allowed, this is likely to change as HEFCE develops a new funding method for Teaching (which is to be informed by TRAC).
5. A dispensation does not mean exemption from annual TRAC reporting (Part III of the Guidance), or from the requirement to bid for research projects on an fEC basis (Part V). TRAC requirements still apply to these institutions. However, they do not have to use fully robust methods. This means that they do not have to:
   • obtain time allocation data from academics (heads of department could, for example, provide this information);
   • use more than four to six cost drivers as they allocate indirect costs;
   • identify space use across the whole institution (as opposed to just that used for Research);
   • commission a full systems audit;
   • calculate an indirect cost rate or estates charges;
   • meet any of the requirements required under TRAC fEC for 1 August 2007, specifically:
     • a robust calculation of FTEs
     • taking into account the type of space when allocating space costs
     • directly allocating laboratory technicians and research facility costs, separately from estates charges.
6. Under TRAC fEC, institutions that are applying their right to dispensation do not have fully robust systems, and therefore:
   • should only apply the lower of their own indirect cost rate; or a dispensation default indirect cost rate, to research projects;
   • should only apply the lower of their own estates charge; or a dispensation default sector estates charge, to research projects.
7. The dispensation default rates are set by the OST/Research Councils.
8. The situation of institutions eligible for dispensation is therefore different from that of other institutions with higher levels of Research activity. More Research-intensive institutions without TRAC-compliant systems can only apply a non-compliant default rate for indirect costs. The non-compliant default estates charge for these institutions is zero.