Part IV - Charge-out rates

Section E: Estate charges

Chapter E.1 Estates cost total

1. An estates cost total for Teaching, Research and Other will have been established from the annual TRAC process.
2. The estates cost total for Research should not include any Research cost that:
   • was charged directly to projects in the prior year as a directly incurred cost; or
   • is covered by the indirect cost rate; or
   • is contained in another charge-out rate (e.g. for equipment or laboratory technicians).
3. This means that estates charges based on 2003/04 Research Support costs, applied to research projects from February 2005, should not include any Research cost that was directly charged to Research and grants and contracts in 2003/04 as a DI cost, or is being included in the indirect cost total for 2003/04.
4. Estates costs that were directly allocated (e.g. charged to projects in 2003/04) are not relevant to the calculation of estates charges (e.g. based on 2003/04 costs). The estates cost total for 2003/04 should form the basis of the 2003/04 rates, irrespective of any direct allocation of estates costs made to projects during that year.
5. The estates costs that should be included in the estates charges are derived from the Support costs allocated in the annual TRAC process. The estates cost total is therefore based on premises expenditure (as defined in the HESA FSR – accessible from Annex 1) plus the net TRAC infrastructure adjustment.
6. This covers repairs and maintenance, utilities, rates, estates staff, rents, gross buildings depreciation and the net TRAC infrastructure adjustment, buildings insurance, cleaning, porters, and security. It includes estates costs incurred by academic departments, and costs incurred by a central estates department. It could optionally include a relevant part of central service department costs attributable to the estates department. It includes the costs of all support staff that relate to these areas.
7. Where some elements of estates are currently handled separately in TRAC costing models (e.g. insurance may be part of the Finance Department’s costs; minor works may be included in academic departments’ costs; equipment costs in the Registry) then these should be identified and aggregated with the rest of estates costs. This is subject to materiality, and the complexity involved (it is acceptable to use high-level, reasonable, estimates of the costs to be transferred).
8. Estates costs should not include the COCE or the financing costs of estates. These are in the indirect cost rate.
9. Estates costs in the annual TRAC process are allocated to Teaching, Research, Other activities and central services, on the basis of usage of that space. Estates charges for Research should not include the estates costs attributable to central service departments which are included in the indirect cost rate.
10. By 1 August 2007, this allocation should take into account the relative costs of different types of space.
11. Equipment costs should be included unless they were funded as directly incurred costs on a research project (in which case they would not be in either indirect costs or estates costs). Laboratory technicians and major research facilities should be included until processes are in place for them to be directly allocated. This must happen by 1 August 2007. Estates charges from 1 February 2008 should not include these costs. The following method should be followed to meet this requirement:
    • estates costs for a year should initially include all of the costs recorded in annual TRAC in that year for the items that are being directly allocated. This should not include the depreciation costs of items originally purchased on research grants and contracts (directly incurred costs);
    • these should include laboratory technicians and major research facilities, as well as other items of equipment that the institution chooses to allocate directly;
    • however, starting in the year when these costs are being directly allocated, a deduction should be made from the Research estates cost total that is used to calculate the estates charges being applied in that same year. This should represent the estimated total of the charges that will be made on research projects. (So this deduction should be made on the 2006/07 estates cost total prior to calculating the estates charge that will be applied to projects, alongside separate laboratory technicians and major research facilities’ charges, from February 2008). The part of this estimated total that relates to research facilities is likely to be more than the total for that equipment actually recorded in the estates cost total – see Chapter G.3;
    • any subsequent over or under recovery of these costs should not be reflected in the estates cost total used to calculate the estates charges.
12. The costs of other technicians and clerical staff (outside laboratories), and the costs of equipment not purchased directly for a project, or directly allocated to a project, should remain in the estates cost total and form part of the estates charges.
13. All equipment costs, including depreciation, should be included, irrespective of funder (unless the items were purchased on a research grant or contract i.e. directly incurred costs). The fEC on research projects will therefore continue to include an appropriate part of the costs of equipment and depreciation funded through capital grants, which have not yet been fully written-off in the books. (Some costs of SRIF and JIF projects are therefore likely to be included in estates costs for many years.)  Their inclusion in the fEC of projects could be considered to be part of the other (Funding Council) side of Dual Support.
14. However, where the initial purchase of a piece of equipment has been included in the fEC of a research grant, it is a directly incurred cost and should be allocated to research grants and contracts in the year of purchase. No part of the depreciation should be included in the estates charges subsequently calculated from the estates costs in that year.
15. Further discussion on how double-charging is avoided is available in Annex 18.
16. Specialist IT research facilities (used specifically for a project or by a Research group) should be directly allocated. This is discussed under major research facilities, below. It is good practice for other IT costs to be allocated as direct costs, for example, where a departmental server measures use by projects. However, some institutions may not have systems to directly measure and charge these costs, or these systems may only cover some of the institutional IT costs, e.g. they may not have a system for charging central institutional IT costs which are generic to all activities (the networks, common systems, support teams, etc). 
17. Where these other IT costs cannot easily be directly allocated, they should be included in either the estates charge or in the indirect cost rate, or charged as a £/FTE and shown as a separate item on the project costing form, as institutions wish.