JCPSG | TRAC Guidance

Part I - Overview

Section A: General Overview

Introduction – what is TRAC?

  1. TRAC (the Transparent Approach to Costing) is the standard method now used for costing in higher education in the UK. TRAC was developed out of work by the Joint Costing and Pricing Steering Group and was introduced after the Transparency Review in 1999 – a government policy study overseen by the Science and Engineering Base Co-ordinating Committee.I After five years of implementation (finishing in 2004), TRAC is now being consolidated and extended to cover full economic costing (fEC) at project level.
  2. The development of TRAC has been the responsibility of the Joint Costing & Pricing Group (JCPSG) – an HE sector body who have been supported by consultants – J M Consulting Ltd. Further information is available on the JCPSG website.ii
  3. TRAC now includes two separate but related costing processes:

    Annual TRAC: an annual retrospective attribution and reporting of costs.
    From 2000/01 all UK HE institutions (about 165) attribute costs from their audited financial statements to activities at an institutional level. This is primarily a public accountability process and leads to annual reporting by institutions of the costs of Teaching (split into publicly-funded and non-publicly-funded), Research (similarly split), and Other core institutional activity. Institutions report in January each year, based on the accounts for the previous year (so in January 2005, they reported costs based on 2003/04 accounts data).

    From January 2006, the Funding Councils require that the annual reporting at an institutional level will include income as well as costs. Institutions will, in effect, report their surplus and deficit position on each of the five activities listed in the previous paragraph.

    The annual TRAC process can also be used to provide management information for internal use, including results by department, and costs per student. It also provides the data (financial and personnel) that is used to calculate the indirect cost rate, the estates charges and charge-out rates for other directly allocated costs such as research facilities and technicians. These are then used when costing research and other projects on a fEC basis.

    TRAC fEC: the forecast and accounting for full economic costs at a project level.
    From 2005 all institutions are calculating the full economic costs (fEC) of each research project, on a reliable and comprehensive basis. This is then used to set the price for grants made by Government (the Research Councils and OGDs (Other Government Departments)) and informs the price on projects for other sponsors.

    The fEC of a project is made up of directly incurred costs, directly allocated costs, and indirect costs (the latter two types of cost use the rates produced from the annual TRAC process). This classification determines how they are recorded and validated. Directly incurred costs are recorded on the basis of actual expenditure. Directly allocated and indirect costs are recorded on the basis of standard costs established at the time of project approval.

  1. Annual TRAC is a holistic approach, producing costs of Teaching, Research and Other activities. The initial focus of TRAC fEC is on research projects and there is detailed guidance in this area because the public funding of Research is now based on fEC. At present, there is not this level of detailed guidance for Teaching programmes.

Benefits and costs of TRAC

  1. When introduced in 2000, TRAC was originally a regulatory requirement on the HE sector. Its primary purpose was about accountability for public funding of higher education, and about reassuring the Treasury that any additional funding provided for higher education could be used properly. However, TRAC was developed by a sector body (JCPSG) and in close consultation with institutions, with the specific intention of being useful to HEIs as well as meeting the accountability requirements.
  2. The development of TRAC fEC also followed this principle. This provides robust data on project costs not only to sponsors, to inform their pricing, but also to institutions to allow them to make better informed decisions about what activities to do, at what prices. This improves institutions’ ability to manage themselves sustainably.
  3. The benefits of TRAC are generally considered to greatly outweigh the costs. The benefits are of several kinds:
    1. Many institutions needed better cost information in 1999, and some had been involved in other costing initiatives before TRAC. It would have been wasteful for several different costing methods to be developed in the sector. HEIs that use cost information have all benefited from the advice, consultancy and support provided by the JCPSG, and also from having a common method available to them that is accepted by Government and other funders as a basis for research and other contracts.
    2. A number of institutions use TRAC data as a key part of their management processes and believe it helps them to manage their institutions more effectively.
    3. TRAC has been the accepted common method of costing used as the basis for a number of studies of the costs of teaching (e.g. of Initial Teacher Training, of National Health Service-funded health professions, of different modes of study and of widening participation) and all of these help to inform Government about the future resource needs of the sector. TRAC is being considered as a method of providing cost-based information to inform HEFCE’s Teaching Funding Method.
    4. The funding for research under the Dual Support System has increased substantially as a direct result of the evidence of deficits on research funding revealed by TRAC.
    5. TRAC also provided the clearest evidence of HEIs’ need for additional cash to invest in infrastructure. While the incidence of backlogs was well-known, TRAC has provided the first generally-accepted quantification of the additional levels of spend required, and some additional public funding for capital assets has been provided on the strength of this evidence.
    6. More generally, the fact that the sector has implemented TRAC has been important in building Government confidence that HEIs can manage additional funding if it is provided.
  1. The total new money that has come into the sector on research, which would not have been provided without TRAC, will be well in excess of £1bn a year.iii
  2. Overall, TRAC has added to the regulatory burden on HEIs, but they would have to invest in better costing anyway. By implementing TRAC so successfully, the sector has gained a significant amount of additional funding, and (probably more important in the long run) has gained greater understanding of its costs and therefore greater control over the management of its business, and ultimately its ability to ensure the sustainability and autonomy of its institutions.
  3. An overall cost and benefit analysis has been done by the JCPSG as part of their assessment of the regulatory burden of TRAC.iv
  4. The on-going annual costs for HEIs are typically of the order of £100k per annum for annual TRAC and, for HEIs carrying out significant volumes of Research, £300k per annum for TRAC fEC. This will vary, depending on the approach adopted by institutions, and on the state and flexibility of their existing systems and processes. Over time, these processes will become embedded into normal institutional management.
  5. Most of this cost is accounted for by time of administration staff (usually in finance or research services). That from academic staff is also included in these estimates, but the burden on individual academics is very low. The main impact on academic staff is:
    1. all academics have to complete a time allocation schedule at least three times over a three year cycle (some institutions do this differently, by using one-week 24-hour diaries for a sample of academics selected on a statistical basis). This is a light-touch but robust method of collecting time at a high level on work done on the core activities of Teaching, Research and Other activities; and by research sponsor group.v It also provides data on time spent in Support of Research or Teaching (for example, writing and reviewing research proposals). Support activities facilitate research activity, but are included as part of the indirect cost rate as they cannot be charged directly to a teaching programme or research project.
    2. all Principal Investigators have to plan and cost the resources needed for research projects. They have already done almost all of this, but they now need to forecast the academic time required robustly. The other new data required to build up the fEC of a project (academic staff salaries, estates and indirect cost charges, charges for research facilities and technicians, and inflation) can be provided and calculated automatically by research costing systems, once fully implemented. Methods of doing this vary by institution.
  1. In practice: (a) should not take more than an hour a year; (b) was arguably always a requirement of Research Councils and some other funders, but is involving some additional time for many academics, until they become familiar with the more complete costing methods now used.
  2. There were also one-off costs of implementing both annual TRAC and TRAC fEC for all institutions. These were harder to estimate as they were very variable depending on how far institutions were already interested in costing, and whether they chose to implement TRAC as a stand-alone requirement, or as a part of their management information strategy.

Annual TRAC - public accountability at institution level

  1. The first TRAC process was introduced after the Government’s 1998 Spending Review as a means to improve accountability for public funding. The Transparency Review report in 1999 recommended the costing methods to be used to meet the Government requirement. Implementation began from autumn 1999. It was a major project for the HE sector. Pilot universities were involved in testing the new methods, and there was a phased implementation. The whole sector reported for the first time in July 2001, and then annually from January 2002.
  2. The main features of TRAC, recommended in the Transparency Review, and with implementation complete by 2005, were:
    • use of Activity-Based Costing and analysis of all institutional costs (as reported in the financial statements) at the level of academic department;
    • accounting for use of academic staff time (through either a diary sampling method or in-year time allocation schedules);
    • use of robust cost drivers to attribute library and space costs and all other support or indirect costs to activities;
    • representation of the costs of investment and risk through the TRAC cost adjustments for infrastructure and the cost of capital employed;
    • calculation of indirect cost rates for Teaching, Research and Other; and calculation of charge-out rates for Research in the areas of estates, major research facilities and laboratory technicians.
  3. The TRAC guidance describes the main costing standards to be achieved by each institution. Underpinning all these is the principle of materiality and a ‘fair and reasonable’ view of costs – this is not an audit approach and institutions are not staffed to undertake heavy administrative processes. TRAC aims to avoid undue precision (or ‘spurious accuracy’ given the nature of academic processes), and to minimise the burden on institutions while achieving necessary accountability. Robustness is important and there are both internal and external Quality Assurance processes within TRAC that are described below.
  4. The implementation of annual TRAC was significantly complete by 2005. Institutions have expended significant effort and cost in implementation, and, as well as meeting the Government accountability requirements, many institutions are now using TRAC data internally for costing, pricing, and financial management. For some, this has been as much a culture change as an accounting development – it is part of a trend in many institutions to accept that they are ‘business-like’ organisations with a mixed portfolio of finances and activities, and a need for better costing tools.
  5. During 2003, an independent review of TRAC was carried out by the Financial Reporting and Activity Costing Group (FRACG).vi This concluded that the TRAC methodology was robust and fit for purpose at an institutional level. FRACG also recommended some improvements to the overall accountability mechanism associated with TRAC which have been implemented.

TRAC fEC – full economic costing for research and other projects

  1. During 2003 and 2004 the Office of Science and Technology led a reform of the Dual Support System for higher education research.vii Under Dual Support institutions receive:
    • a block grant of core research funds from the Funding Councils (called quality-related funding or QR, allocated on the basis of the Research Assessment Exercise, the RAE) that they use for some of their own blue-skies research, and to develop and maintain infrastructure for research that is carried out for external sponsors in the ‘public scientific good’;
    • a second stream of project-related grant funding from the Research Councils.
  1. The latter had covered only the direct costs of projects (excluding academic investigators’ time) plus a contribution to infrastructure costs. Over many years, faster growth in project-related funding (including significant growth in income from charities, the EU and industry) than in the block grant has put stress on institutions’ cost recovery on research, and thus on the sustainability of their research activity and infrastructure.
  2. Coupled with this, the absence of robust data on the full costs of research led many institutions to underestimate the costs of research and other projects, so that even commercial research and consultancy, for example, has often been sold to the private sector at below cost. This has contributed to what has been called the ‘low price culture’ in higher education.
  3. From 2005 the Government provided additional funds for the recurrent costs of research supported by the Research Councils. These are to be used to make this research more sustainable – not to increase volumes of activity.
  4. To give effect to this policy, HEIs applying for future research grants from public funders now have to identify the full economic cost (fEC) of carrying out the project in question, including an appropriate share of all infrastructure costs and of the cost of capital employed. Funding is either at 100% of fEC (the normal case with non-competitive research funded by government departments),viii or 80% of fEC (from the Research Councilsxi where the Dual Support arrangements are in place). For most projects this is a significant increase over the former price. It is the Government’s intention that Research Councils will move to paying close to 100% of fEC by the start of the next decade, thereby further freeing up institutions’ own research funds.
  5. Funding for competitive projects and for commercial work for industry (market-priced) is not affected by this, but a better knowledge of the costs helps institutions to avoid inadvertently subsidising work which should at least be at ‘full cost’. Institutions need to make a surplus on their commercial or contract research work, as part of their balanced portfolio. It has never been allowable to subsidise such work from public funds, but institutions have been reminded of these responsibilities through a new edition of the Financial Memorandum under which they operate with the Funding Councils.
  6. Institutions implemented TRAC fEC during 2004 and 2005. The main changes detailed in the guidance are that institutions now have to:
    1. forecast/estimate academic staff costs robustly at project level – typically a Research Council funded project lasts three years and involves a mix of different types of Principal Investigator, co-investigator, etc.;
    2. allocate costs directly to projects for space; major research facilities such as animal houses, ships, telescopes; and technicians - using charge-out rates derived from the annual TRAC process;
    3. attribute support costs to projects using a robustly calculated indirect cost rate, expressed as a £ per full time equivalent (FTE) academic/research staff.
  1. These three new elements of cost, plus the directly incurred costs that have always been identified (research assistants, consumables, equipment purchases etc.), make up the fEC of a research project. These costs are profiled over the life of the project, and adjusted for pay increments and inflation. This provides the basis for the cost-based price (e.g. 80% or 100%).
  2. If it is less than 100% of fEC, the institution calculates the contribution required from themselves and ensures that either they have sufficient public funding to subsidise the ‘scientific public good’ research; or that the research project is of sufficient strategic interest for institutions to subsidise through any other funds that they may have available. It is not necessary for the HEI to account publicly, at a project level, for where this subsidy comes from, but it should be able to reassure itself that across its portfolio of activities, in aggregate, taking one year with another, this subsidy does not exceed the funds available.
  3. Other requirements for project costing remain as before, in particular the need to record and account for directly incurred costs (research assistants, consumables etc.) in an auditable manner. There is no need formally to account for the actual time spent on projects by academic staff – other evidence of time spent such as records of meetings, laboratory notebooks etc., that are a standard part of project management, are all that is needed. Similarly, there is no need to monitor actual use on a specific project of any of the estates and other directly allocated costs. Academic staff costs and directly allocated costs are charged to projects at the standard costs originally estimated, and do not change throughout the project (unless there is a significant change to the programme of work).
  4. Overall, TRAC fEC has been a more significant implementation task than annual TRAC was. It is also being phased in over five years – 2004 to 2009. Institutions which have very large numbers of research projects are generally making major changes to their financial and research systems to be able to estimate and record the fEC of projects: this was previously not a figure that was recognised or funded by public bodies and therefore rarely calculated or recorded by institutions.
  5. The methods in TRAC fEC could also be used for costing Other projects, such as consultancy, but at present there are no detailed requirements on how to do this and institutions are therefore free to apply the TRAC principles as appropriate.

Impact of TRAC on academic staff

  1. Most of annual TRAC is effectively invisible to academics. It is a post-hoc attribution of costs done by each institution’s finance department. However, the largest single cost for all institutions is academic staff, and the finance department needs a robust method to allocate academic staff time between the five activities recorded by TRAC. This can only be obtained by asking academic staff to provide data themselves.
  2. Therefore, for most academics annual TRAC introduced a rather visible, but minimally burdensome, new requirement – to complete a simple set of time allocation schedules every three years. This is important not only for the annual institutional return, but to allow the institution to calculate an indirect cost rate and estates charges for Research. Without accurate time recording of this sort, institutions are unable to recover their full costs.
  3. TRAC fEC is much more visible to all academics who apply for research grants. They now have to understand that research incurs costs greater than direct marginal costs, and how to use their institutional systems which will apply it to their project applications. They need to be more aware of TRAC; and of the full range of resources required to carry out the research; and they need to understand how the institutional rates are used in costing their projects. They need some briefing and support. In particular, they need to consider carefully how to estimate their time robustly, to ensure that they do not under-charge and therefore under-recover their costs, that research sponsors are being charged the amount of time for the work that is actually required and that they are not being over-committed. There is little information currently available on this in institutions, and it will take time for estimating processes to become robust. But this is a TRAC requirement.
  4. Because research is so important in some institutions, and the pressures of the RAE are so pressing, TRAC fEC has needed careful management in institutions. Far from threatening their RAE outcomes, TRAC fEC provides additional funding to make their research more secure, but it would not be surprising if some academics saw TRAC fEC as a further burden that could damage their research.
  5. In reality, TRAC fEC imposes very little extra work on academic staff. They have to estimate the time and resources required for research projects as part of applying for public research contracts. And they have to keep track of their directly incurred costs and progress of the work during the lifetime of projects. But they should be doing this already - it is a requirement of the Research Councils. The main extra work associated with TRAC fEC is for central finance staff, and this extra accountability burden is justified by the fact that institutions will receive a larger amount of public funding for the same volume of research.
  6. The Research Councils have also made significant changes to their processes and systems. An important part of these is the Peer Review process. Academics need to adopt some new methods as they review project bids prepared on an fEC basis. In particular, they need to consider whether the levels of resource estimated for the work (academic staff time, the research facilities being used) are appropriate. They also need to consider value-for-money issues if there is a ‘tie-breaker’ between two otherwise equal bids, once academic, quality, and other criteria, have been satisfied.

Implications for research sponsors in the public sector

  1. Sponsors outside the public sector, or those who commission contract activity (not research) will continue to fund this on a basis other than fEC – perhaps using market or negotiated prices – as they currently do. HEIs will, however, be able to negotiate from a more informed position, as they can now calculate the fEC of the proposed work.
  2. Research sponsors in the public sector should follow Government policy on how they price and fund research. An explanation of Government policy is given by the Office of Science and Technology.
  3. These public sector sponsors who are now pricing on an fEC basis need to understand TRAC sufficiently to allow them to work through the implications for their own calls for bids and funding mechanisms. It does not require a comprehensive knowledge of TRAC (and should not therefore necessitate reference to the detailed TRAC guidance).
  4. Sponsors of research in the public sector need to:
    • consider the implications for their budgets of (generally) the increased funding that is now requested on each research project. This may require a review of the volume of research they commission;
    • review each of their schemes to ensure that where they involve a grant for research work, they allow institutions to bid on an fEC basis, compliant with TRAC. Research Councils, for example, have had to re-design a number of their schemes which did not allow institutions to bid on an fEC basisx;
    • understand TRAC at a level that will enable them to ask institutions for appropriate information (on applications and throughout the project) and to make decisions at project application on the basis of that information. They need to understand:
      • the type of academic and research staff who can be included in the costings (almost all);
      • whether fellowships are costed and funded on an fEC basis;
      • how Support time of academics is accounted for (in the indirect cost rate);
      • whether institutions can prepare costs that total less than 100% fEC (they cannot – although they can agree prices that are less than 100% fEC);
      • whether indexation is included (it is);
      • how indirect costs and estates costs are charged (using robustly calculated indirect cost rates and estates charges, but expressed in a variety of ways, depending on the method selected by the institution – see below);
      • that for a time HEIs with more effective accounting systems will have the potential to identify more costs as direct costs, thereby reducing their indirect cost rates, so that it will be, at the margins, more difficult for funders to compare ‘like with like’;
      • how TRAC avoids double-charging, for example: for equipment that was originally funded on research grants; for equipment funded through the Science Research Infrastructure Fund (SRIF); for staff who already charge 100% of their time to a fellowship; for maternity pay of academics;
    • amend their calls for applications; their processes for reviewing applications; and their terms and conditions of grant;
    • consider quality assurance and validation issues.

Quality assurance and validation of TRAC

  1. The Government has accepted that TRAC is a robust costing method. TRAC specifies standards, principles and conventions that must be used when costing in HEIs, based on audited accounts of institutions; and has defined sets of minimum mandatory requirements to ensure that costs are fair and reasonable, and are calculated in a consistent manner across the sector. The conclusions of the FRACG review confirm this.
  2. The quality assurance (QA) and validation processes included in TRAC (covering both annual TRAC and TRAC fEC) include:
    • internal verification of data (e.g. time allocation) and validation and testing of cost drivers; reconciliations, reviews and tests for reasonableness; audit trails; methods to avoid double-charging;
    • internal audit review of methods, planned on a risk-based approach, but including a full systems audit; with an institutional Committee confirming compliance;
    • requirements to supply information for benchmarking on a comparable basis, and to justify indirect cost rates and estates charges that are above the upper quartiles of the sector.
  3. Additional quality assurance was provided through an external QA process carried out in 2004/05 that focussed on annual TRAC and the readiness for TRAC fEC. Every institution was visited by an external QA team who assessed the robustness of their TRAC methods and examined a self-certification proforma and benchmarking information provided by the HEI. If significant issues were identified then institutions had to address these before they could apply their own indirect cost rates and estates charges to publicly-funded research projects. If they cannot address these then they have to apply default charge-out rates set by Government.
  4. In addition, Research Councils use dipstick testing to help satisfy their accountability requirements. Other research sponsors have started to participate in this established process.
  5. Institutions need to be reassured that there is a level playing field, and that other HEIs’ costs are as robust as their own. And funders need to know that they can rely on the TRAC costs as a basis for funding.
  6. External QA processes will continue in the future to provide this reassurance. A major review of this was commissioned by the Research Councils and Funding Councils in 2005. This will join up all of the various strands of QA activity that currently take place and that should take place, to meet the probity requirements of sponsors, and institutions’ own needs.

In conclusion

  1. TRAC is a complex process, with a ten-year implementation period, which has to satisfy a number of different objectives and stakeholders, and to be applicable across a large and diverse group of institutions, with a minimum of additional administrative effort. Because of the way it has influenced funding and institutional management, TRAC has had a broader impact on the HE sector than just as a costing method. Different people may not all have the same things in mind when they refer to TRAC. It certainly will be perceived differently in different institutions. So far, TRAC has proved flexible and robust enough to accommodate all these needs, while also being sufficiently rigorous and challenging to move practice forwards in the sector. But there is much work still to do.
  2. Some would prefer TRAC to look simpler, but much of the apparent complexity in the guidance comes from the multiple activities and streams of accountability that HE institutions are subject to (unlike, say Research Councils, they have to account for publicly-funded teaching, and enterprise activity as well as research, and they are funded for each activity from a mix of public and private sources; they may also own other buildings such as museums and churches).
  3. There are also some inherently difficult costing issues in higher education which include (but are not limited to): medical schools and the knock-for-knock relationships with the NHS; distinguishing research and scholarship; costing complex heritage estates and multi-user facilities with no market value; and accounting for the time of academic staff who often work well outside any standard working week and on multi-task activities (such as supervising PGR students) which cannot easily be categorised as just one of teaching or research.
  4. Overall, TRAC can be relied upon to provide robust costs for a number of different purposes. These include: to show probity of funding; to estimate project costs; to inform pricing; and to inform decision-making in institutions. But whilst TRAC produces robust cost information, it does not dictate the decisions to be made. Those decisions should not normally be driven by cost factors alone, or even primarily. Academic and strategic considerations should set the context and guide decisions; costs should just be used to help inform this process.

Section B: Key Aspects of TRAC

An overview is given in each part of the Guidance:

Section C: Managing for Sustainability

  1. Institutions are required to take responsibility for their own financial sustainability, particularly in respect of research infrastructure.

Background

  1. The Government has accepted TRAC data which showed a significant under-funding on publicly-funded research. This evidence base was supported by national studies of infrastructure carried out in 2001.xi The 2002 and 2004 Spending Reviews awarded more money for research, both recurrent (QR and the Science Budget) and as capital through SRIF. Institutional responsibility for their sustainability was a condition for this, set out in several Government documents and embodied in the Financial Memorandum between an institution and its Funding Council.xii
  2. During 2003 and 2004, OST carried out a review and reform of the Dual Support System,xiii at the same time working with other major funders (OGDs, charity, industry) to improve the sustainability of the HE part of the UK research base.xiv As a result of this work, institutions will now prepare project applications to Research Councils and OGDs on a TRAC fEC basis, and those sponsors will pay a higher percentage of fEC.
  3. These are major changes but they are not a final and sufficient answer to research sustainability, and some issues will continue to be debated. However, they immediately improved the cost recovery for every research-active HEI. Equally significantly, they are changing the climate under which research has been subsidised by institutions to an unmanageable extent, while public funders had been experiencing little pressure to pay the real costs of the work they fund.
  4. There are wide implications and benefits for institutions. Research Council funding is not the only area where institutions need to improve their cost recovery. They also need to change the low price culture and make a convincing case to charities and other funders. The principles of using fEC to manage institutional sustainability apply to all activities. In England the HEFCE Financial Memorandum was amended to strengthen this requirement.
  5. Teaching equally demands a full cost approach in the context of setting fee levels (where these are not fixed by the Government). TRAC fEC guidance focuses on the costing of externally-funded research, but can as well be applied to institution-/own-funded projects and to Other projects (e.g. consultancy). The principles and approaches can also provide the fEC of Teaching courses or modules. HEFCE are using TRAC to inform their Teaching Funding Model. In time, Research Councils may use TRAC to inform the funding of PGR student activity.

What sustainability means

  1. Sustainability can be defined along the following lines:

An institution is being managed on a sustainable basis if, taking one year with another, it is recovering its full economic costs across its activities as a whole, and is investing in its infrastructure (physical, human and intellectual) at a rate adequate to maintain its future productive capacity appropriate to the needs of its strategic plan and students, sponsors and other customers’ requirements.

  1. Another way to express this is to say that the institution needs to do the activity today in a way which will not threaten its ability to do it in future.
  2. The reference to future needs suggests that what is needed is ‘adaptive’ capacity, i.e. sustainability is not about preserving current activities indefinitely but rather about preserving the right sort of capacity (changing over time) to carry out the activities that are necessary in the future.
  3. Institutions need to do five things to manage their research on a sustainable basis. These are:
    • establish and recognise the fEC of research;
    • manage the research activity strategically;
    • secure better prices for research;
    • improve project management and cost recovery;
    • invest in the research infrastructure.
  4. This must be done as part of a long-term strategy for the institution. As part of this institutions will need to realign their resource allocation models in order to ensure that these do not give perverse incentives, and that information from these and from TRAC costing systems do not conflict.
  5. Further information on managing for sustainability was given in a section in the original TRAC fEC Manual, now available as an extract.xv
  6. The Funding Councils will monitor institutions’ ability to manage themselves sustainably. The metrics used in this might include trends in the financial health of the institution, the productivity and quality of staff, the level of investment in equipment and buildings, and the reduction in the size of the backlog maintenance required.
  7. Implementing these processes is a significant challenge for many institutions. They need to introduce some relatively well understood business techniques, but to do it in a way which respects the nature of the academic process and does not threaten the conditions which make a research unit, academic department, university, college or other academic institution successful – and different from a commercial business.

Sources of further information

[i] Transparency Review of Research – Report to the Science and Engineering Base Co-ordinating Committee commissioned by the Joint Pricing and Costing Steering Group:  J M Consulting Ltd, June 1999.

[ii] web link http://www.JCPSG.ac.uk

[iii] this funding includes the Science and Research Infrastructure Fund (£500m p.a.), Quality-Related funding from the Higher Education Funding Councils  (increased from 05/06 and 07/08 by a total of £480m p.a. in England, with funds provided for proportionate/equivalent increases in Scotland, Wales and Northern Ireland), funding from Research Councils (increased from 05/06 and 07/08 by a total of £200m p.a., with no increase in volume), and charity partnership funding (£90m p.a. from 07/08). This excludes additional income that will be receivable from better cost recovery and more appropriate pricing on Other Government Department or industrial projects.

[iv] web link Assessment of the Regulatory Burden of TRAC (by J M Consulting), March 2005.
A Regulatory Impact Assessment for fEC is also available at web link http://www.ost.gov.uk/research/dualsupport.htm

[v] the seven TRAC research sponsor groups are: institution-/own-funded research; Research Councils; OGDs; charities; EU; overseas/industry/commerce; PGR training and supervision.

[vi] Financial Reporting and Activity Costing Group report to the Higher Education Funding Councils in England, Scotland, and Wales; HEFCE 26/2003. July 2003. web linkhttp://www.hefce.ac.uk/pubs/circlets/2003/cl26_03.htm

[vii] Dti; the Sustainability of University Research: A consultation on reforming parts of the Dual Support System. OST, May 2003. document link http://www.ost.gov.uk/policy/universityresearch.pdf

[viii]  web link http://www.ost.gov.uk/research/dualsupport.htm - in particular the Revised Pricing Guidelines for non-Research Council projects.
Also see HM Treasury letter dated 13 February 2004: University research: Costs to government departments, available at document linkAnnex 3 of the Guidance.

[ix] pricing based on 80% of fEC is being followed by the Research Councils, the Royal Academy of Engineering, Royal Society, British Academy and the Department of Health NHS Research and Development Programme. The 80% covers all research projects funded through grant, with the exception of project studentship costs (funded at stipends plus tuition fees) and the purchase of equipment (funded at 80% up to a £50k threshold, and at 100% above this threshold). Refer for example to the Research Council funding arrangements described on: web link http://www.pparc.ac.uk/jes/DualSupport.asp

[x] Research Council schemes which were not TRAC-compliant included those which had previously paid replacement teaching costs; only paid travel and subsistence (no staff time); funded very large surveys that were sub-contracted by an institution; co-funded with industry; required a 50% contribution from the institution; funded research centres, units, and national facilities; funded knowledge transfer or services (but called it research); and so on.

[xi] document link Study of Science Research Infrastructure, undertaken by J M Consulting Ltd for the OST, December 2001.

[xii] e.g. Investing in Innovation 2002;  The Future of Higher Education 2003. The text of the Financial Memorandum for institutions in England can be found on HEFCE’s website web link www.hefce.ac.uk

[xiii] the Government’s continued commitment to the dual support system was given in ministerial letters to Heads of HE Institutions in November 2003 and January 2005; available from OST’s website web link http://www.ost.gov.uk/research/dualsupport.htm

[xiv] there was also a separate, parallel project for the non-HE part of the publicly-funded research base. The main report was entitled PSREs and the Science Base: A policy for sustainable trading and joint strategic investment in PSRE infrastructure, available at web link http://www.ost.gov.uk/research/psre_sustainability.htm

[xv] further information on managing sustainability was provided in the original TRAC Guidance Manual Volume III, replicated in document linkAnnex 4 of the Guidance. Also refer to notes from workshops on sustainability held in November/December 2004, see document linkAnnex 5 of the Guidance.