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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.

Part IV - Charge-out rates

Section A: Overview

  1. Part IV covers the calculation of indirect cost rates, estates charges and charge-out rates for laboratory technicians and major research facilities. The focus is on establishing these rates for application to research projects. However, the principles are also appropriate for Teaching and Other activities.
  2. Indirect costs and estates costs are charged to research projects via an indirect cost rate and at least two estates charges.
  3. These costs are different from 'directly incurred' (DI) costs, (research assistants, consumables, etc). DI costs are dedicated to that project and would not be incurred if the project did not take place. They can be charged directly to a project.
  4. Indirect costs are needed to support projects or programmes, but do not have the same direct link with any one project as directly incurred costs. Therefore proxies have to be used to attribute these costs to projects. The proxy for indirect costs is a £/FTE charge-out rate.
  5. Directly allocated costs, such as estates, are also costs of services used by a research project, where the services are shared by other activities and projects. The project’s use of the service is estimated (e.g. in terms of units of time), and a standard charge-out rate per unit is applied to arrive at a directly allocated cost for that project.
  6. The indirect costs and estates/facility costs used to calculate the charge-out rates are derived from the TRAC Support cost total, produced from the annual TRAC process. As part of this process, each type of Support cost had been attributed between Teaching, Research and Other. The total indirect costs for Research divided by the total FTEs for Research provides the indirect cost rate for Research (£ per FTE). These rates are calculated annually, using historical data. There is no forecasting or estimating of either costs or FTEs. The £/FTE rates are then applied to the direct Research time of the staff and PGRs carrying out Research, expressed as FTEs.
  7. FTE numbers are derived from the annual TRAC process. FTE numbers used in the indirect cost rate comprise:
    • the time spent on direct Research activities (excluding all Support time) of academic staff;
    • all of the time of research staff, including visiting researchers;
    • the FTE number of post-graduate research students (PGRs) multiplied by a standard weighting of 0.2 (subject to a national review in 2006).
  8. One indirect cost rate for Research, covering all research activity, is used, as the costs do not vary significantly by type of project or department.
  9. Estates charge-out rates can use a similar £/FTE proxy, but the PGR weightings are different.

Indirect costs

  1. Indirect costs consist of:
    • the Support time (cost) of academics
    • clerical and administrative staff in academic departments *
    • non-staff costs in academic departments *
    • central services including academic services such as the library and information services
    • the estates costs of central service departments
    • the gross cost of capital employed (incorporating interest and restructuring costs).

*Note:  These costs exclude any costs that have been charged to a project as a directly incurred cost, or are being charged as a directly allocated cost. By definition, the Support time/cost of academic staff already excludes time/cost that has been charged to a project or otherwise relates to a direct Research, Teaching or Other activity.

Estates costs

  1. Estates costs are applied to research projects in a similar way as indirect costs. Although a direct link can be made between the use of space, and therefore estates costs, by each project, this can be very onerous to introduce effectively. TRAC therefore allows estates charges to be used. Two estates charges are calculated – laboratory, and non-laboratory (or generic or classroom).
  2. The estates charges for Research can also be based on a £ per FTE calculation for academic staff, research staff and PGR students. PGR student numbers are included with a weighting of 0.5 for non-laboratory departments and 0.8 for laboratory departments.
  3. Estates costs are the total estates costs of academic departments, including repairs and maintenance, utilities, rates, buildings depreciation and the net TRAC infrastructure adjustment, and estates staff.   Equipment depreciation (and purchases under capitalisation limits) is also included.
  4. Institutions can use different methods to allocate estates costs to research projects, as long as they are at least as robust as the £/FTE calculation. Alternatives include:
    • calculating and using a third rate for clinical departments;
    • calculating and applying a rate for each department;
    • weighting the rates for different types or grades of staff;
    • charging projects with the space actually likely to be used (including a share of departmental Support space) and an appropriate square metre cost;
    • charging projects with the cost of the space likely to be used on a cost per square metre basis, plus a charge per academic/research staff FTE for the office and other Support space in academic departments;
    • directly allocating more estates costs, such as all equipment.

The application of these rates

  1. Rates are calculated once a year, and apply from 1 February of each year for the following 12 months. For example, data from the 2004/05 year (included in the annual TRAC report submitted at 31 January 2006) is used to produce the rates applied from 1 February 2006 to 31 January 2007. These are indexed (by two years’ price levels) to provide a reasonable estimate of first year costs for research projects.
  2. Default rates are used for institutions whose own rates are not robust.
  3. Indirect costs and estates costs can be charged to activities other than research projects. When costing the supervision and training of research students, the £ per academic/research staff indirect cost rate and estates charges for Research can be applied. However, these should be weighted to reflect the weightings of PGR numbers in the original rate calculations (0.2 for indirect costs, 0.5 or 0.8 for estates).
  4. Similar techniques can be used to charge Teaching programmes, or Other projects, with the indirect costs and estates costs for Teaching, or Other, as appropriate. Relevant costs, and FTEs, are provided by the annual TRAC process.  However, it may be more useful to show the rates for Teaching on a £ per student basis, rather than as a £ per academic.

Other directly allocated costs

  1. Two types of estates cost – laboratory technicians and major research facilities – can remain part of estates costs until 2007, but must by then be directly allocated to projects separately from estates. Charge-out rates (e.g. £ per FTE or £ per hour of facility usage) are again used for this.
  2. Academic staff time is also directly allocated cost, the calculation of charge-out rates in this area is covered in Part V (estimating researcher costs).
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