JCPSG | TRAC Guidance

Part III - Annual TRAC

Costing system schematic

data	process	product

The annual TRAC process involves the attribution of costs to five figures, for reporting each year to the Funding Councils. The aim is to satisfy public accountability, and also to provide data that can be used for internal management.

The costing schematic shows how the annual TRAC processes provide data for the annual TRAC return and the charge-out rates that are used to derive costs used in estimating the fEC of research projects.

Section A: Overview

Background

1. The context in which annual TRAC was introduced is described in Part I.
2. TRAC aims to provide high-level aggregate information for Government. The principle is that the costs of activities to be reported for the TRAC requirement should be at as high a level as possible while meeting the requirement.
3. The focus was initially on publicly funded activity: Government was interested in understanding what cross-subsidy, if any, there was from public funds to non-publicly funded activity. The agenda is now broader than that – it is now about full cost recovery and long-term financial sustainability, and about all activities in aggregate.  

External accountability

4. Institutions are to report the total gross costs of institutional activity on Teaching, Research and Other activities, as calculated by a robust method and reconciled to consolidated financial statements. This is to be signed off by the head of institution as representing a fair and reasonable view of the actual costs.
5. To do this, institutions have to collect data about the costs of: Teaching (T), Research (R), Other activities (O), and Support (S). Support activities are carried out on behalf of the other three, and these costs are separately collected and then attributed to the other three. Support costs are not reported separately.
6. For public accountability, five cost figures need to be reported as follows:

   Teaching		Research		Other
   publicly funded	non-publicly funded	publicly funded	non-publicly funded

7. These total:

   costs in the financial statements

   plus

   cost adjustments: infrastructure cost of capital employed

8. Income figures are now to be reported alongside the costs.
9. The role of the head of institution here is important. He or she is the designated officer (under the Funding Councils’ financial memorandum) and so has the responsibility to satisfy himself or herself that the figures reported are fair and reasonable.

Internal management

10. For internal management, institutions are to calculate costs of Teaching, Research and Other activities, by department and research sponsor type:

11. This information is to be generated for internal purposes, for quality assurance and to inform pricing. It is not to be reported annually, but there will be ad hoc requests for information from the public sector funding bodies. These requests are likely to focus on requirements to account effectively for the use of public funds. Public sector sponsors will also need to assess the extent that complementary funding streams are mutually re-enforcing.
12. Research sponsor type indicates a broad grouping of sponsors: Research Councils; institution-/own-funded; UK government; PGRs; charities; EU; industry. TRAC does not require the collection or production of information by an individual sponsor, nor does TRAC facilitate this. There is also no requirement to report information by external sponsor type externally – although there is a requirement to collect it. Institutions will have this information available as they build up to the five figures required for reporting, and it is at least possible that there will be a future requirement for external reporting of these to satisfy the legitimate needs of public sector bodies.
13. The term ‘department’ is used here to describe an academic unit in an institution. Departments are aggregated into three subject levels or discipline groups for TRAC. Costs are to be robust at the level of discipline group, but not at the level of an individual department. The subjects that are included in each discipline group are not defined in TRAC.
14. Costs do not have to be analysed between PF and NPF, or by research sponsor type, at the level of individual department.

Charge-out rates

15. The annual TRAC process generates the indirect cost rates and estates charges that are used to charge sponsors with costs of a particular project or programme.
16. Costs are classified as direct or Support during the annual TRAC process:
    • Direct costs are those that can be attributed directly to an individual project or programme, or are shared between a few projects or programmes. These would include Research Assistants' costs (R), under-graduate student fieldwork (T), residences (O).
    • Support costs, such as indirect and estates costs, are necessarily incurred in carrying out Teaching, Research or Other activities, but cannot be so directly charged to a specific activity or project.

      Support costs are attributed to academic departments, and to activities, using cost drivers. These include: the square metres of each type of space used (estates); the number of books (some library costs); staff and student numbers (some of the finance department costs).

17. The indirect cost rates and estates charges are derived from the Support costs identified during the annual TRAC process.

Processes

18. The data collection and aggregation processes which are needed to produce the annual TRAC figures are shown in the figure – the pyramid of costs:

    The pyramid of costs

    Reported at institution level £
    Collected at department level     (central departments)
    Cost attribution to department/ activity
    Time allocation to activity

Overview of the cost attribution process

19. The methods to be used are shown in the figure – overview of the cost attribution process:

     

20. These methods cover the following:
    • attribution of academic and research staff costs. Researcher and lecturer costs should be attributed directly to an activity where possible (e.g. a Research Assistant to Research). Otherwise academic staff should complete time allocation schedules using robust methods to provide information for use in attribution. These are not timesheets: they might include, for example each academic completing three time allocation schedules that together cover a 12-month period, within each three-year cycle – see Chapter C.1 academic staff time;
    • attribution of non-staff costs. Attribution methods are to be based on activity-based costing concepts. Cost drivers are used to attribute costs, held in cost pools, to activities – see Section D all other costs;
    • calculation of cost adjustments. Two cost adjustments are made:
      • an infrastructure adjustment which bring in an estates cost that is closer to the full economic cost of maintaining the institution’s physical infrastructure. This is usually understated in institutions’ financial statements;
      • a cost of capital employed which ensures that TRAC costs cover the costs of financing and contain a margin that meets the costs of restructuring and future development needs.

      See Annex 15 (cost adjustments).

21. In addition, the Funding Councils require income to be reported alongside costs in the annual TRAC return. Attributing income as well as costs is also a valuable internal management tool for reviewing performance and developing processes that support sustainability. Internal and external benchmarking of surplus and deficits can provide assurance as to the robustness of the methods used. See Annex 16 (income allocation).
    

Section B: Minimum requirements

1. The minimum requirements are that:
   • costs of T, R, O, S are calculated;
   • costs of T, R, and O are calculated for each academic department; and are robust at the level of subject type or discipline group (clinical, laboratory, and non-laboratory);
   • the costs of R are calculated for each research sponsor type;
   • the definitions of T, R, O and S are followed – see Annex 6;
   • TRAC accounting and costing principles and conventions are met – see Part II;
   • costs are attributed directly to activities where reasonable to do so;
   • the salary costs of Research Assistants and Research Fellows are attributed wholly and directly to Research;
   • a robust method of time allocation is in place and used for reporting activity carried out by academics:
     • time allocation schedules are used;
     • that cover periods that are representative of 12 months within a three-year cycle;
     • individual academics complete the schedules (and response rates, and methods of correcting mistakes, and of completing data-sets for non-respondents and leavers, are appropriate to ensure ‘fair and reasonable’ results);
     • where in-year schedules are completed, there are at least three of these completed over the year (i.e. each is less than six months in length);
     • data is collected over a three-year cycle;
   • when sampling time periods or academic staff (whether deliberately or through a response rate of less than 100%):
     • they are representative of types of staff, of each clinical, laboratory and non-laboratory group of departments, of each research sponsor type, and of the weeks or periods in the year;
     • acceptable levels of statistical accuracy are achieved;
     • the sample size is robust at a lower level (e.g. by academic department, or by type of staff) if institutions are calculating indirect cost or estates rates at these lower levels;
   • the time recorded on the time allocation schedules reflects the total time being worked on institution activities, irrespective of any ‘standard’ or ‘contracted’ working week;
   • clinical services time is firstly allocated to O(CS) and subsequently attributed to T, R, O, S, on the basis of services received from the NHS:
     • this is informed by either an analytical review (e.g. a discussion with each head of department; or specific study) or by a knowledge of what was actually being received;
     • work towards developing a better understanding of the NHS/HEI knock-for-knock arrangements is taking place;
   • the time/costs of training and supervising PGR students is separately identified, and attributed to PFR (PGR);
   • the method of attributing costs to research sponsor type is reviewed to ensure it is fair and reasonable;
   • there are clear policies, and communication of these policies, for:
     • confidentiality/anonymity of time data;
     • the use of the time data;
   • a cost driver model is used for cost attribution, with a minimum of four to six cost drivers;
   • the systems and models contain audit trails, allowing data to be traced;
   • the indirect costs attributed to PGR students reflect a 0.2 weighting per FTE compared to a 1.0 weighting for an academic or research staff FTE;
   • cost drivers for library/learning resources are robust;
   • cost drivers for estates/space are robust:
     • square metres are attributed to academic departments and to activity on the basis of usage (by each department, and for each activity);
     • when attributed to activities, differential costs are applied to the square metres, recognising the different costs of at least four types of space;
     • the space costs attributed to PGR students reflect 0.8 and 0.5 weightings per FTE, in laboratory and non-laboratory departments respectively, as compared to a 1.0 weighting for the FTE of an academic or research staff FTE;
   • other cost drivers are based on robust data;
   • information is gathered to inform a future study of PGR weightings;
   • tests are carried out to confirm that the figures produced are ‘fair and reasonable’;
   • the TRAC reported figures (without the cost adjustments) are those in the audited consolidated financial statements;
   • an infrastructure cost adjustment and a cost of capital employed are calculated and included in reported cost figures;
   • but no other adjustments are made to the costs in the financial statements when TRAC costs are reported;
   • the annual TRAC return is made in the required format, and signed by the head of institution;
   • quality assurance requirements have been met - see Part II ;
   • data is provided to allow the calculation of indirect cost rates, estates charges, and other charge-out rates:
     • for Teaching, Research and Other;
     • at the level of clinical, laboratory and non-laboratory, as appropriate;
     • that will meet the requirements for the calculation of charge-out rates for Research – given in Part IV.
2. These minimum requirements have been developed from the costing standards 1 to 6, and 9.
3. The Funding Councils require annual TRAC costs to be reported each year – see Annex 1 for a link to the report format.
4. The Funding Councils also require income to be reported alongside the annual TRAC cost figures – see Annex 16.
   

Section C: Staff costs

1. All staff costs should be attributed to activities – for academic and research staff; other staff in academic departments; staff in central departments.
2. Staff costs should be directly attributed to activities where possible. These would include any staff costs incurred by the institution for Research Assistants, Research Fellows, laboratory technicians and other support staff who are dedicated to one research project, and visiting lecturers.
3. Costs of academic staff should be attributed on the basis of time allocation records.
4. This is part of the pyramid of costs

   Cost attribution to activity
   Time allocation to activity

5. An informed view from the head of department or appropriate manager should inform the attribution of the costs of other staff in academic departments.
6. The costs of staff in central departments should be attributed to Support. They should then be attributed with other costs in their respective departments to academic departments and to activities, according to cost drivers.
7. The allocation of academic staff time, and costs is of particular importance in TRAC:
   • there is little history or culture of time recording;
   • academic staff costs make up a significant proportion of the costs of institutions;
   • data on staff FTEs (in particular on staff working in research) are a significant part of the calculation of the indirect and (often) the estates charges on Research;
   • the percentages of time spent on each activity provide cost drivers used to attribute some of the other costs in institutions (although this should be minimised);
   • academic staff costs recorded by research sponsor type (for example, the Research Councils) is used to check that charges made to projects for each sponsor are fair and reasonable, in aggregate – see reconciliation.

Chapter C.1 Academic & research staff time

Categories of time

1. Staff time should be attributed to activities and to sub-categories of these activities on the basis of the time actually spent on each activity. This information is then used to attribute staff costs.
2. This attribution is carried out irrespective of who is funding the salary.
3. TRAC definitions should be followed in all cases. These are given in Annex 6.
4. The activities are Teaching, Research, Other and Support. The sub-categories are as follows:
   • the time on Teaching should be attributed between PF and NPF;
   • the time spent on Research should be attributed to each research sponsor type. PFR (institution-/own-funded) and PFR (PGRs) are two of the seven research sponsor types.
5. Where staff wholly or mainly work on one of the main activities (Teaching, Research, Other) then their costs should be attributed directly to those activities:
   • the costs of Research Assistants and Research Fellows whose time (and therefore cost) is wholly chargeable to one or more research projects should be attributed directly to Research. They may carry out Teaching and Support duties, but where the sponsor of their research project agrees to include this time in the project, then it should be attributed to Research in the annual TRAC time allocation process;
   • the costs of visiting lecturers engaged in Teaching should be attributed to Teaching;
   • the costs of contract staff engaged in services rendered should be attributed to Other (or as appropriate for the activity being carried out).
6. Where staff are working on more than one activity, time allocation methods are used to attribute their time, and therefore cost, to activities. Timesheets are not required. Time allocation methods collect time spent on each activity expressed in terms of percentages of a working year or hours.
7. The following guidance – on allocating time between activities – refers to ‘academic time’. It also applies to any other researcher (see Annex 6 for definition) who is not working solely on Research (or Other) activity.
8. When academics are completing time allocation schedules it is possible to design these either to include numerous activities, or to minimise the number of activities listed.
9. As a minimum, academics should separately record time for:

   Teaching
   institution-/own-funded Research
   externally-funded Research/PGRs
   Other (Clinical Services)
   all Other activities
   Support

10. Institution-/own-funded Research and externally funded Research/PGRs should be recorded separately as there is no proxy that could be used to allocate any ‘Research time’ total between them.
11. Clinical services should be recorded separately as O(CS) to allow its subsequent attribution to T, R, O, S on the basis of services received from the NHS (applicable to medical/dental schools working under ‘knock-for-knock’ arrangements):
    • institution staff, paid by the institution, who provide clinical services to the NHS, should initially allocate that element of their time to Other (Clinical Services) activities. This should subsequently be reattributed to T, R, O and S, depending on the services being provided to the HEI by the NHS, where possible;
    • the initial allocation of clinical activities should therefore be recorded in the time allocation system to O(CS), and collected separately from the other types of work being allocated to Other, (such as consultancy and non-Research clinical trials).
12. Annex 10 gives more detail about the attribution of the costs of medical and dental schools. This Annex includes mandatory guidance.
13. Proxies can be used to attribute time further:
    • Teaching time can be attributed between PFT and NFPT on the number of students falling into each category.

      Costs of teaching overseas and self-funded students taught on UK credit-based courses are generally recorded to PFT by academics in the first instance.

      The costs of teaching these students should then be allocated from PFT to NPFT. A proxy of student numbers can be used (the number of FTE overseas and self-funded students, divided by total students being taught). However, this calculation should be made at a departmental level, not at an institutional level.

    • externally funded Research time can be attributed to research sponsor types on the basis of numbers of RAs and PGRs – perhaps weighted; or on the basis of directly incurred costs (excluding equipment purchases).

      However, this can only be done in laboratory departments. Different patterns of research activity in non-laboratory departments, with fewer RAs, make these proxies less usable, and the heads of those departments need to be involved in advising on the allocation of their departmental time between sponsor type.

    • Support time can be attributed to T, R, and O on the basis of the time that has already been allocated to those activities.
    • information about the volume and type of services provided to the HEI by the NHS under knock-for-knock is used to attribute Other (Clinical Services) to Teaching, Research, Other or Support.
14. Proxies should be applied at a department level, not institution level.
15. The following proxies should not be used:
    • income (as the funded elements vary by sponsor, with some paying indirect costs and some not);
    • direct non-staff costs (as the levels of consumables and equipment purchased are not indicators of how staff time is spent).
16. Using proxies, rather than asking academics to record their time against multiple categories of time, does reduce the complexities of the time allocation schedule. However, many institutions believe that these proxies are not sufficiently robust. It is good practice also to collect separately:
    • Support for Teaching, Support for Research, Support for Other, general Support. This provides a more robust method of allocating Support costs to activities (and Support costs are a large item of cost). There is otherwise a danger that Support will be a large figure that cannot easily be understood or attributed to T, R and O.

      However, if these are collected separately then at least four categories should be added (Support for Other should not be subsumed into general Support, for example); and it should not be assumed that scholarship can easily be assigned directly to Teaching or Research – some will relate to all activities and therefore should be assigned to a fifth category of scholarship, or included in the general Support category;

    • PFT courses (attended by both PF and NPF students), and short or overseas courses. This categorisation can often be made by academics.

      What is difficult is for them to categorise their time on credit-based courses between PF and NPF students as the cost of teaching these two types of student is significantly the same. A proxy of student numbers can be a more robust method for allocating Teaching time on credit-bearing courses between PF and NPF;

    • time by research sponsor type. This categorisation can often easily be made by academics (who may only be involved on a few research projects, and with a few PGR students, at a time). This avoids the need to ask the head of each non-laboratory department to allocate their department time to research sponsor type.
17. Some institutions also consider collecting additional information to help satisfy some of their other costing objectives, for example:
    • lower-level activities within T, R or O – e.g. outreach activities and knowledge transfer within O, collected separately from time on consultancy
    • types of Support – preparing bids, or course committees
    • projects, courses or programmes.
18. This information can be useful in course costing, for example. However, it is not a TRAC requirement. It can add significantly to complexity.
19. When recording time, care should be taken with the following definitions:
    • scholarship, as distinct from Research – see Annex 6 - definitions;
    • the inseparability of Teaching and Research. Some academics might find that a small amount of their activity cannot readily be split between T and R. They should apportion this activity on the basis of the amount of T and R that they have otherwise directly allocated;
    • academic time spent in training and supervising PGRs. This should all be allocated to PFR (PGRs). This is despite the fact that different individuals and organizations can be paying maintenance grants, bench fees, stipends, or tuition fees – and not all of these will be PFR sponsors. This apparent anomaly is corrected when income is reported, see Annex 15 (income allocation).
    • overseas and self-funded students who attend the same courses as HEFCE-funded students. It may be easier (and more robust) if the academic reports the teaching of both of these type of student under one category, and proxies are used to allocate the total to PF and NPF, as discussed above.
20. The time on which academics are asked to report should be defined as the total time they have made available for HEI work. This is different from the number of hours they are contracted to work; or any standard working year (e.g. 1650 hours).
21. The time should not include holidays taken and ‘standard’ levels of sickness (i.e. they should not report for TRAC purposes on holiday taken within the entitlement, and sickness up to say two weeks in a year). This has important implications when calculating the indirect cost rate and estates charges and then applying these to the days available to work (i.e. excluding weekends, holidays and ‘normal’ sick leave) – see standard working hours.
22. The time should include longer periods of leave. This might arise from maternity leave, paternity leave, sick leave, secondments or compassionate leave. The allocation of time (and costs) associated with longer periods of leave will depend on whether any cover is to be charged to the department and activity – see Annex 9.
23. Any extra hours over a ‘standard working week’ (howsoever defined) will not be reported under TRAC, even if information on hours is collected by the institution. The extra hours will not be reflected in the costs, as hours are converted to percentages of time when reported and used in cost allocation. TRAC leads to the reporting of costs: it does not consider productivity.
24. Care should be taken with regard to private consultancy. There are three main types of consultancy, although not all of these will necessarily apply within any particular institution. Materiality is an important consideration here – see Annex 9.

Chapter C.1 Academic & research staff time

Time allocation methods

in-year retrospective | diaries | other

25. A robust method of time allocation should be in place and used for reporting activity by academic staff. A robust method has the following elements:
    • time allocation schedules are used;
    • that cover periods that are representative of 12 months within a three-year cycle;
    • individual academics complete the schedules. These should not be completed on their behalf by their head of department or another individual;
    • response rates, and methods of correcting mistakes, and of completing data-sets for non-respondents and leavers, are appropriate to ensure ‘fair and reasonable’ results;
    • where in-year schedules are completed, there are at least three of these completed over the year (i.e. each is less than six months in length);
    • data is collected over a three-year cycle.
26. When sampling time periods or academic staff (whether deliberately, or by achieving a response rate of less than 100%):
    • they should be representative of types of staff; of each clinical, laboratory and non-laboratory group of departments; of each research sponsor type; and of the weeks or periods in the year;
    • acceptable levels of statistical accuracy should be achieved.
27. The sample size should be robust at a lower level (e.g. by academic department, or by type of staff) if institutions are calculating indirect cost or estates rates at these lower levels.
28. Acceptable time allocation methods include:
    1. in-year retrospective time allocation
    2. diaries
    3. other – proxies, workload planning models, structured interviews and workshops.
29. Methods that are not acceptable include:
    • estimating; or using performance targets for each academic;
    • annual retrospective time allocation, by either individuals or heads of department on their behalf.
30. It is not a TRAC requirement to link the collection of time with performance appraisal, and the implications of this should be considered very carefully before it is done.

i. In-year retrospective

31. This method of time allocation involves each academic completing three or more time allocation schedules, covering a year, every three years.
32. Time is generally recorded in percentages (of available time).
33. All academics can be asked to participate in a single year in the three-year cycle (a ‘big bang’ approach) or different departments can be involved in different years (a phased approach).
34. The 12-month period can be an academic year, financial year or any other set of 12 months, as long as every month in a year is covered, within the three-year cycle.
35. At least three time allocation schedules should be collected over the 12-month period. It is good practice to consider the pattern of academic activity when designing these. Four or six in-year schedules, covering each term and each vacation might be easier for academics to complete. They represent logical time frames around which academics can remember their activity, as they are based around periods which each display a constant work profile. Alternatively, each of three schedules could contain two columns (covering activities during the term, and activities during the vacation).
36. It is not a requirement to use monthly time allocation schedules – these might be regarded as timesheets. If an institution or department does wish to introduce these, their implementation should be considered very carefully.
37. Sampling can be used. If so, the samples selected should be representative of the staff type (e.g. grades), departments in each of the three discipline areas, of research sponsor type and of each different period in the year (a period being a teaching term, summer vacation, and so on) – see Annex 9 for more detail on the use of representative departments. The same population should be tested two years running, or the data confirmed in some other way (less robust processes can be used for this) to check the bias (variability) in the data to confirm that it provides acceptable levels of statistical precision.
38. Most institutions using in-year retrospective time allocation require all academics to participate. The advantages and disadvantages of sampling are set out in Annex 8.
39. However, response rates are rarely 100%. This means that sampling has taken place. An institution should collect figures that give a robust representation of the institution's activities. This should ensure that the institution’s results are robust for each of the following:
    • at a discipline level. Figures should be robust for each of the three main groups of department: clinical, laboratory, and non-laboratory. If the institution intends to calculate and apply estates charges or indirect cost rates for additional groups of departments (e.g. part-laboratory), or for individual departments, then the results should be robust for each group or department;
    • for each activity. Institutions should confirm that the responses fairly reflect the work profile of the different types of staff and types of departments/units, in terms of their T, R or O focus. 

      They need to be representative of the different types of staff in terms of their work profile. Salary bandings/grades are often used as a proxy for this, with a further check that the different types of research unit/department have been appropriately covered;

    • by research sponsor type. The sample sizes of respondents should ensure that the data is robust for Research activity for each sponsor type (e.g. Research Councils, OGDs, charities) at an institution level;
    • if an institution intends to calculate and apply separate estates charges, or indirect cost rates, for different types of staff, or for different departments, then their time allocation should be robust at these lower levels. The minimum TRAC requirements are, however, at a much higher level than this, as set out under the first two bullet points.
40. As a rule-of-thumb, if an institution has a response rate lower than 75%-80% of the whole population, then they should confirm that their response rates are acceptable. This use of a 75%-80% response rate to indicate the need for a review does not mean that each institution has to achieve this level of response.
41. The appropriateness of their response rates should be reviewed by an individual with statistical expertise. This (combined with reasonableness reviews and proactive involvement in external benchmarking) will allow an institution to confirm that the time collection exercise has been carried out robustly.
42. If an institution does find that it is short on returns for any one time period in a particular area (for example, from professors, or from laboratory research units) then they do not have to re-collect time data from all academics or areas. All they have to do is to 'top-up' time allocation returns from a few more staff of the required type/area, before finalising their data collection for that year.

ii. Diaries

43. This method of time allocation involves academics completing a number of weekly diaries. These generally involve 24 hours, 7 days, with an activity recorded against each half hour or hour.
44. The hours are totaled for each activity and expressed in terms of percentages of total available time.
45. If the diary is based on 24/7, then it should include a specific category to cover holidays, sick, and non-institutional activity including private consultancy. This should be excluded from total available time and therefore not used when calculating percentages of time.
46. A sample of weeks in a year, and/or academics, can be used. Statistical sampling techniques should be used to determine appropriate sample sizes. Expert advice should be obtained for this. Annex 8 (sampling) gives further information and a case study.

iii. Other

47. Proxies such as workload planning models, structured interviews and workshops could be used as a time allocation method. However, these can be difficult to design robustly. They should:
    • be comprehensive – cover all academics and all activities. They should therefore cover scholarship, preparation time, institution-own-funded Research – and all available time, not contracted time;
    • be robust – a minimum of three time allocation schedules or equivalent should be collected, covering a 12-month period, completed by each academic or a representative sample;
    • reflect reality – record what actually has taken place (not what was planned or ‘standard’). If planned workloads were to be used, there should be a direct proven correlation between this planned workload and actual workload. Standards would need to be tested and shown to reflect actuals.
48. It is unlikely that many institutions currently have workload-planning models with this level of rigour.
49. Structured interviewing can be used as a method of collecting time by activity. This might involve:
    • workshop discussions (of individuals or managers – using data such as contact time, but also technical estimates such as the preparation time for each contact hour). The information thus gained would then need to be tested to confirm it applied in practice;
    • staff surveys or interviews;
    • creating ‘standard’ workload profiles for staff carrying out different types of work – and confirming through appropriate data collection that these applied in practice.
50. These methods need to be used in a sufficiently rigorous way to be acceptable under TRAC. They need to cover all periods of time in the year, all staff, and include robust testing to ensure that statements reflect actual practice. These methods are likely to be costly to implement.
51. These types of models, timetables, job descriptions and/or outputs are often useful supporting techniques, for testing data collected through other methods.

Chapter C.1 Academic & research staff time

Designing the process

52. The following table sets out the main tasks in designing a time allocation process:

agree the time allocation method to be used; determine whether to use sampling or not; agree the categories or types of staff whose time is to be directly allocated; agree the categories of staff who are to participate in the time allocation process; consult with unions (on-going); communicate with staff (on-going). Newsletters, websites, workshops and other methods of communication are important in improving their understanding of TRAC and its purpose, and its benefits. These techniques can improve response rates; agree activity categories to be recorded and definitions of these (and match with institutional terms as necessary); agree proxies for further attribution as necessary (PF and NPF Teaching; to each research sponsor type; of Support); consider: the collection of FTE information (part-time working) the collection of information on grades whether hours are recorded the use of representative departments confidentiality/anonymity the distribution of the time allocation schedule; More information is provided on each of these areas in Annex 9 design time allocation schedule: This would include definitions, format, instructions, working paper or aide memoire for use by staff. Annex 7 provides examples of time allocation schedules.

Chapter C.1 Academic & research staff time

Implementing the process

53. The following table sets out the main tasks in implementing a time allocation process:

    obtain list of staff identify those who are to be directly attributed distribute time allocation schedules answer any queries, provide support receive completed time allocation schedules and follow up non-respondents extrapolate for non-respondents and leavers

i. obtain list of staff

54. This list can describe those in post at a specific date in the year.

ii. identify those who are to be directly attributed

55. Records from the research grant administration system, and payments to visiting lecturers etc., coupled with information from heads of department, would provide this information.

iii. distribute time allocation schedules

56. The time allocation schedule can be produced on paper or electronically. A schedule on e-mail or a web-site can:
    • improve the calculation (highlighting where 100% has not been achieved)
    • improve response rates, if e-mail or web usage is part of the academics’ communications culture
    • save time on keying in data.
57. However, a system to protect confidentiality may be required.
58. Numbers or names should be allocated to each schedule (depending on confidentiality). A covering letter or equivalent should accompany this – along with easy access to definitions, instructions and perhaps the aide memoire/working paper.

iv. answer any queries, provide support

59. A help desk or support line should be provided for queries.

v. receive completed time allocation schedules and follow up non-respondents

60. Institutions should ensure that those who respond to requests to complete time allocation schedules are representative of those who do not respond. If this is not the case, then specific types of the non-respondents should be identified for follow up.
61. The decision to contact non-respondents would depend on the use of the data (whether just for TRAC or to meet other costing objectives). If sampling techniques are used, the requirement to follow up non-respondents would also depend on the (useable) response to date compared with the required sample size in each staff group, time period, and group of departments (or sub-group).
62. If sampling techniques are not used, institutions should consider whether the responses provide a ‘fair and reasonable’ result. This was covered under Section C.1 earlier in this section.
63. When contacting non-respondents, the main actions are:
    • reminders
    • estimation or other action to complete gaps.
64. In both cases some information about who has or has not responded needs to be maintained centrally.

vii. extrapolate for non-respondents and leavers

65. Time allocation data could be used as a proxy to attribute the time (and cost) of leavers and non-respondents. It would have to be robust to do this.
66. This process could be informed by a study of the beginning and end-of-year staff lists – perhaps in conjunction with the head of each academic department. It would also allow the appropriate treatment of units which have been subject to significant restructuring during the year.

Chapter C.1 Academic & research staff time

In subsequent years

67. Once collected robustly in the three-year cycle, time allocation data does not have to be collected again within those three years.
68. Data from one year can be used as a proxy for the next year, provided there are no significant changes to activities and structures. Institutions do not have to repeat any one method of time allocation year after year, once they are satisfied that the method meets TRAC requirements, the data are fair and reasonable, and there have been no material changes from year to year in their activities.
69. Institutions should survey heads of department, and use high-level criteria, each year to ensure that they identify areas that have changed materially. These criteria could include mergers, numbers of staff, numbers of students, RAE rating and type of work, volume of income from different sources, changes in staff:student ratios, changes in the ratio of support staff to academic staff.
70. If there have been material changes in a department (size, type of activity etc.) then institutions should assess the impact on the allocations of time. New data (if required) can be collected through discussions with heads of department.

Chapter C.2 Academic & research staff costs

1. Staff costs should be attributed to activities on the basis of the time spent on each activity by each individual.
2. The main steps required in this are set out in the table below:

   design spreadsheet or database system collect costs for attribution record time collect and record other cost drivers attribute costs calculate totals and test for reasonableness report; review and amend methods as required reconcile Research Council costs

i. design spreadsheet or database system

3. A simple set of spreadsheets, or equivalent, can be used to record staff time and attribute staff costs. Key fields and functions would be to:

   record time and other data:

   • department;
   • staff number (indicating grade/salary banding – see Annex 9 for more);
   • each of the activity categories against which time is recorded (PF Teaching, NPF Teaching, the seven Research sponsor types, between Other (Clinical Services), and the rest of Other, Support (and types of Support if institutions wish));
   • FTE percentage of staff – see Annex 9;

   record costs from the financial accounts:

   • total staff costs;

   assist in the attribution of costs:

   • staff costs that have been charged to research projects as a directly incurred cost;
   • the names and costs of academics who are paid to only work on one activity (visiting lecturers etc.);
   • time collected from the annual time allocation process, weighted by staff FTEs – see Annex 9;
   • staff salaries to be applied to each individual’s time record;
   • other cost drivers.

ii. collect costs for attribution

4. These should be total staff costs reconciled to the financial statements – see Annex 9. They include some costs that are not derived from the payroll (e.g. visiting lecturers and visiting researchers).
5. They should be recorded at the level of individual members of staff.
6. The percentages of time allocated to activities should be weighted to recognise the different pay levels of individual staff. Either calculated average staff salaries for each academic/research staff grade or pay banding, or the actual salaries of each individual academic or research staff, can be used. They should include on-costs and allowances and aggregate to total staff costs, reconciled to the financial statements.

iii. record time

7. The time allocation schedules will provide reference number or name, percentages by activity, or hours, and, possibly, a FTE percentage.
8. If hours are recorded, percentages should be calculated. If staff time is being grouped before applied to costs, then the percentages of time should be weighted by FTEs – see Annex 9.

iv. collect and record other cost drivers

9. Cost drivers or proxies can be used to attribute time to lower levels of activity where necessary, for instance:
   • student numbers – for attribution between PF and NPF Teaching;
   • numbers of RAs and PGRs – for attribution to research sponsor type for laboratory departments;
   • head of department percentages – for attribution to research sponsor type for non-laboratory departments;
   • information about the volume and type of services provided to the HEI by the NHS under knock-for-knock – for attributing Other (Clinical Services).

v. attribute costs

10. Attributions would:
    • firstly, directly attribute staff costs where possible (e.g. Research Assistants to Research);
    • use the time allocation data, and salary, for each individual or group of individuals (weighted by FTEs) to attribute their costs to the categories of time collected;
    • attribute the costs of cover for maternity and sick leave so that the activity is assigned the costs of the person carrying out the work, or the costs of the individual who is on leave, but not both – see Annex 9;
    • use proxies to attribute time between PF and NPF Teaching, and by research sponsor type, and from O(CS) to T, R, O and S, as necessary;
    • use all other time – including for both academic and research staff – (or another cost driver) to attribute Support time to Teaching, Research and Other, as necessary.
11. This attribution should lead to academic staff costs being assigned to:
    • Teaching, Research, Other, and Support
    • a split of Teaching between PF and NPF
    • Research shown by research sponsor type
    • Other split between (Other Clinical Services), and the rest of Other
    • department (and therefore discipline group).
12. The financial accounts will already hold cost data against individual research project accounts. This should be used when attributing costs that have been directly incurred (Research Assistants, Research Fellows, other staff who are wholly dedicated to a research project, or who have completed project-level timesheets).
13. Many directly allocated Research costs will, over time, be recorded against individual project records. However, the DA academic staff costs that have been directly allocated to a project under TRAC fEC should not be used to attribute staff costs in the annual TRAC process. That charge was made on an estimate. Only actual time, recorded through the time allocation method, should be used in attributions carried out for the annual TRAC process (and therefore the calculation of the indirect cost rate and estates charges).
14. Academics sometimes receive a payment (made through their institution’s accounts) in addition to their salary, for their work on a particular course or project. The attribution of costs to that activity (e.g. NPF T or R) should be based on the proportion of the total payments to that individual that represents the amount of their time spent on that activity. However, the attribution could alternatively be based on the additional payments, if this is unlikely to lead to a materially different allocation.
15. Similarly, any attribution to Other, for academic staff time spent on trading company activity should reflect the actual time (and costs) spent. Only actual time recorded through the time allocation method, should be used in allocations for the annual TRAC process.

vi. calculate totals and test for reasonableness

16. Totals (percentages and costs) should be derived for each:
    • type of staff (salary banding/grades)
    • department
    • activity
    • lower-level activity including research sponsor type
    • Support costs as distinct from other costs
    • sample size/response rates.
17. Figures should be tested for reasonableness. Techniques for doing this are described in Part II (internal review).
18. Academic staff costs attributed to Support form one of the elements of the total Support costs in an institution. Support costs are used to calculate the indirect cost and estates rates.

vii. report; review and amend methods as required

19. Time data is used to calculate the costs reported externally in the annual TRAC return. Time data is not disclosed separately in this return. It can, however, be useful in sector benchmarking exercises.
20. The institution’s own experience of implementing, the experience of the rest of the sector, together with the QA processes, are likely to continue to identify scope for improvement. This might require a change in method, or some modifications to the current methods.
21. It may include, for example:
    • considering requesting time by sub-category of Support (Support to T, Support to R, Support to O, General Support);
    • improving the reallocation of O(CS) to T, R, O, S.

viii. reconcile Research Council costs

22. At the beginning of year five (2008/09) of TRAC fEC implementation, most projects which started prior to early 2006 (when the Research Council funding methods changed) will have been completed. Therefore, academic staff costs will be charged during 2008/09 on almost all externally sponsored projects undertaken in that year.
23. From December 2009, and annually thereafter, institutions are able to, and should, compare the total academic staff costs attributed to the Research Council sponsor group via the annual TRAC time allocation exercise, with the total academic staff costs charged to Research Council projects under TRAC fEC in the accounting records.
24. It is good practice for this comparison to be made on academic staff time as well as costs, but only if institutions are able to calculate the total of academic staff time charged to research projects (by sponsor) in a year. This may have costly systems implications for some institutions, and is not a minimum TRAC requirement.
25. This should only be regarded as a broad comparator, as there are various reasons why the two totals will be different, for instance:
    • the use of two different costing methodologies – based on actual time in annual TRAC (but ignoring the total amount of time actually worked), compared to the standard working year assumed in TRAC fEC (based on an average likely working year, which will, in practice, vary by individual);
    • fluctuations in the average time estimated on live projects in any one year compared with the actual time recorded under the annual TRAC time allocation for that year of the projects’ lives;
    • the impact of the less significant changes in project staffing, e.g. where the RA leaves three months before project-end, and the PI takes on a greater part of the work than originally estimated;
    • the normal slippage in the final completion of a research project, taking into account publications;
    • the difficulty in estimating time where the research outputs, the emerging requirements from the research as it develops, and the quality of the staff are not fully known;
    • there may still be no time or (full) cost records being kept for every project that started before the beginning of 2006 and is still ‘live’;
    • the difficulty in separating out research time from research student supervision, especially when the student is an inseparable part of the research team and is not a project studentship;
    • time spent supervising project studentships is recorded as part of the ‘PGR’ total in the annual TRAC time allocation, but this may or may not be in the time charged to Research Council project cost records. (Even if this time is charged to a Research Council project, that will not mean it will be funded on that basis);
    • the time of staff from other institutions who are collaborating on a grant will appear on the lead institution’s project costing record but the staff themselves will not have participated in the lead institution’s TRAC time allocation survey;
    • knock-for-knock, where O(CS) time reallocated to Research for the annual TRAC time allocation may not be matched against time from clinicians recorded on the project cost records (other types of resources may be provided to the HEI as part of the arrangements);
    • use of salary bandings to calculate charge-out rates on projects;
    • actual increments and pay awards differing from those assumed in the charge-out rates and project indexing.
26. RAs work partly on Teaching and Support, but all of their time is being recorded as Research. However, as this treatment is the same for both TRAC project costing and for the annual TRAC time allocation exercise, there is no reconciling item here.
27. These differences will be inherent in the comparison of total costs of time charged against Research Council projects with the costs of time actually spent (available from the annual TRAC time allocation exercise). Despite this, the comparison should provide confirmation (or otherwise), at the level of the institution as a whole, taking one year with another, that the Research Councils are not being charged more than the salary costs that the HEI is incurring on those projects.

Chapter C.3 Support staff

Support staff in academic departments

1. The cost of staff who have been charged to research projects as a directly incurred cost (e.g. some laboratory technicians) should be attributed to Research in the annual TRAC process. Where they have completed timesheets, the balance of their time not charged to Research should be attributed to Teaching, Other or Support as identified through those timesheets.
2. The Research time of all other laboratory technicians should be directly charged to research projects as a directly allocated cost (at least by 1 August 2007). As part of this, an analysis of the time of this group of staff would have been carried out, and should inform the attribution of their annual cost to activities – see Part IV Charge-out rates.
3. The costs of other support staff in academic departments is a Support cost (and forms part of the indirect cost rate).
4. To this can be added the costs of RAs who are ‘in-between’ projects and who are not engaged significantly in institution-/own-funded Research, or Teaching. Their costs should be attributed to Support.
5. These Support costs should then be attributed to activities using a robust approach. These costs should not automatically be attributed to activities on the basis of academic staff time, nor should it be assumed that they only relate to Teaching. An example of a robust approach is to provide heads of department or equivalent with a list of these costs and ask them to indicate the appropriate percentage split between Teaching, Research and Other.
6. Institutions could alternatively ask these staff to complete time allocation schedules (perhaps on an annual basis) but the administrative burden of this should be carefully considered – it is not a TRAC requirement.

Support staff in central departments

7. The costs of staff associated with residences, catering, conferences, should be attributed directly to Other. Some other staff (for example, working in university consultancy companies or other trading companies) should be attributed to Other where appropriate.
8. All other staff costs in central departments are attributable initially to Support. The costs of staff in each functional area should then be aggregated with non-staff costs in that area, for attribution to Teaching, Research and Other – see Chapter D.2. These totals (Support costs for Research, for example) are then included in the costs that form part of each indirect cost rate calculation (or, in the case of the estates staff, the estates charges).
9. In particular, staff associated with estates, or premises, should be attributed to a cost pool containing all estates costs. Staff associated with libraries or learning resources should be attributed to a cost pool for libraries.

Section D: All other costs

Chapter D.1 Cost pools and cost drivers

1. It is efficient first to group costs before their attribution. These cost groups are often called cost pools.

Cost pools

2. Costs in any one cost pool are attributed using the same cost driver. A cost pool may relate to an activity, or a Support cost:
   • activity cost pools represent the costs of activities. There are three main activity cost pools – one for each of Teaching, Research, and Other. Additional cost pools are needed for sub-activities (PFT, NPF T; each research sponsor type; O and O(CS));
   • Support cost pools are intermediate holding places. The costs of a finance department may be separated into a number of cost pools – relating to payroll, fees, all other areas. A different cost driver is used for each cost pool (staff time/numbers, student FTEs, all other costs) when attributing its costs to an activity cost pool.
3. All cost pools need to hold information by academic department; and need to differentiate between Support costs and direct costs of the main activities of Teaching, Research, and Other (to allow the calculation of the indirect cost rates).

Cost drivers

4. Cost drivers are used at various stages of the cost attribution process. Cost drivers are used for those costs that cannot be directly allocated.
5. Costs attributed to Support cost pools use cost drivers to attribute their costs to activity cost pools. For example, estates costs would be assigned to an estates cost pool and would be attributed to academic departments and activities on the basis of space used.
6. Some costs do not need to be routed via a Support cost pool, as they can be directly attributed to an activity cost pool:
   • catering, conferences, residences – to Other
   • trading companies – to Other (or Research or Teaching, depending on the activity being carried out)
   • research support department – to Research.
7. However, cost drivers will still be applied to costs in the last cost pool to attribute those costs to academic departments, and to research sponsor type.
8. A wide set of definitions of cost drivers can be used:
   • a measure of the quantity of resources consumed by an activity
   • those factors responsible for variation in the cost of an activity
   • a measure of the benefits received
   • a measure of how often activities are performed and the effort involved in carrying them out (an activity driver – e.g. the number of students or staff).
9. Cost drivers used for attribution to departments are not generally the same as those used for attribution to activities.
10. A wide range of cost drivers could be used. Some are used by some institutions in their existing resource allocation models (RAMs). However, RAMs have historically had a different focus and it is unlikely that all cost drivers currently used in RAMs are relevant:
    • TRAC requires an attribution to activities (few RAMs have required this);
    • the data used in the RAM may not be up-to-date and may be drawing on planned rather than historical data;
    • there should be no ‘motivational’ element in the cost drivers for TRAC – this can be important part of a RAM;
    • the cost drivers in the RAM are often many and detailed and their use within the extra dimensions of TRAC (activities, PF and NPF, research sponsor type) may prove very complex.
11. It is important to avoid confusion over the two sets of drivers, and the information that results. It is good practice for the differences to be minimised, and clearly understood. Many institutions are planning to bring their RAM and TRAC methods in line as they implement TRAC fEC and allocate the additional research funding that they are receiving – see Annex 5.
12. Sensitivity analysis can be carried out to inform management of the impact on different cost drivers on key cost pools.
13. TRAC does not require a large number of cost drivers. Institutions have considerable discretion to choose which cost drivers to use and at what level of detail. Some areas to be considered are:
    • the costs that are already directly charged to departments in institutions’ management accounts (for example, equipment costs, space costs, in some institutions);
    • the availability of information held for other purposes (for example, information on the use of library and learning resources may be recorded for use in resource allocation and strategic planning in some institutions);
    • the cost of collecting the information (for example, comprehensive information of the use of IT facilities may be costly to collect).
14. Some common cost drivers that might be suitable to use are:
    • headcount and/or academic/research FTEs – sometimes including clerical, administrative and technical staff;
    • headcount and/or student FTEs, distinguishing between PGR, under-graduate and post-graduate taught students;
    • square metres of usable space occupied by departments;
    • total Research costs;
    • total non-pay costs;
    • academic or total staff time;
    • all DI costs.
15. An illustration of how these cost drivers can be used is given in this table.
16. Academic staff time should only be used as a cost driver if there is no other better alternative. When used, it should include the time directly attributed (by Research Assistants) as well as that attributed on time allocation schedules (by academic staff).
17. Income is unlikely to be a robust cost driver as it is not a good indication of the use of resources by departments or activities.
18. If direct costs are being considered as a cost driver, then two factors should be considered:
    • the purchase cost of large items of equipment should not be included;
    • attribution to Other activities will be lower than it would be if academic staff time was the driver. Direct staff costs may therefore form a more appropriate driver than direct costs.
19. In some cases a combination of cost drivers may be appropriate e.g. the use of both staff and student numbers to attribute some types of library costs.
20. In some cases it may be appropriate to weight elements of the cost driver/s used e.g. Arts students may receive a weighting of 2, compared to 1 for Engineering students, in attributing costs to academic departments for the use of the library. These weightings should be evidence-based (e.g. the number of library loans) where appropriate – see Annex 11.
21. The use of the cost drivers at the ‘broad-brush’ level shown in the following table are acceptable for TRAC, provided the institution considers it a fair and reasonable representation of the use of the resources being attributed. The exception is for estates and library/learning resource centre cost drivers, which should be reviewed in more detail.
22. All cost driver data should be robust.
23. The table shows cost drivers that could be used to attribute:
    • costs to academic departments (column 2);
    • costs to activities – Teaching, Research, Other, Other (Clinical Services), and Support (column 3);
    • the costs of Support activities to Teaching, Research and Other (column 4).
24. This table does not show the next level of attribution – Research costs to research sponsor type, Teaching costs between PF or NPF, or O(CS) to Teaching, Research and Other. These are discussed in Chapter D.3.
25. Costs can be attributed at a high level. Column (1) in the table above refers to high-level accounts codes, aggregated as required in HESA FSR Table 6 (accessible via Annex 1). These high-level codes can be used in TRAC (along with department-level codes for attributing costs to departments. This means that only a few high-level cost drivers are required.
26. A cost driver does not need to be separately identified for every account code – this would lead to an extremely onerous attribution process. The lower the level of code, the more detail needs to be extracted from the accounts – and simple spreadsheet systems might need to give way to more complex databases with computerised data transfers. Cost pools are used to group costs and simplify processes.
27. It is good practice, however, to consider the use of more detail than that shown in the table, as it leads to better quality cost attribution. It may also be useful if an institutions wishes to meet other cost objectives (e.g. costing to lower-level activities not required under TRAC). In particular, an institution might wish or need to analyse their accounts codes at a lower level than shown here, e.g. estates costs into building cost pools, or library into periodicals/staff/books etc. This allows them to use many more cost drivers than illustrated above. This also meets TRAC requirements, but is not necessary for TRAC, and of course involves more work.
28. Others may consider that more complex attributions are necessary properly to represent the use of given resources, e.g. finance department split into payroll (using a cost driver of staff numbers); accounts payable (total non-pay costs); accounts receivable (total income); etc. Materiality is relevant here.

Chapter D.2 Support costs

1. Support costs for each activity and for each department should be identified and totalled. This will consist of the totals of all the Support cost pools, prior to their attribution to activities. It provides the totals that will be included in the indirect cost rate and estates charge calculations.
2. Support costs are costs that are shared, and cannot be directly attributed to activities. They include indirect costs and estates costs. They are defined in Annex 6.
3. Estates costs of central service departments are initially held in the estates cost pool, but are then attributed to the cost pools for central service departments. This element of estates is therefore attributed to activities along with other central service costs, and they are included in the indirect cost rate, not the estates charges.
4. Some of the costs of estates, laboratory technicians, and major research facilities will be recorded in the financial accounts (on the project cost records) as Research. These are historically based estimates and should not form the basis for cost attribution to annual TRAC. Actual costs should be attributed to activities using cost drivers.
5. The Support cost total, together with directly incurred costs and other costs that have been charged directly to an activity, should agree with the financial statements including exceptional costs, less the net cost of capital employed and net infrastructure adjustment.
6. Support costs are to be attributed to Teaching, Research and Other, as shown in the table above.
7. In some cases it will be a straightforward process (e.g. research administration to Research; most of Registry to Teaching – although some costs will need to be attributed to Research for the PGR student usage of Registry).
8. Otherwise, a reasonable cost driver might be all ‘other costs already attributed’.
9. Non-staff costs (and support staff) in academic departments which are not directly chargeable to an activity should not automatically be attributed to activities on the basis of academic staff time, nor should it be assumed that they only relate to Teaching, or only to Research. An example of a robust approach is periodically to provide heads of department or equivalent with a list of these costs and ask them to indicate the appropriate percentage split between Teaching, Research and Other.

Chapter D.4 Libraries

1. The costs of libraries and learning resource centres should be attributed on a robust basis. Institutions should:
   • allocate costs directly to an activity or academic department where possible, and otherwise, use appropriate proxies;
   • review the results of this attribution with the librarian, and obtain their agreement as to the reasonableness of the overall allocation.
2. It is good practice to also:
   • review the cost-benefit of collecting more information to inform attribution (data could be collected through data samples, occasional reviews, and/or measurement);
   • consider analysing further cost elements into different cost pools, and using different cost drivers to attribute them. For example, periodicals, specialist collections, staff by area of responsibility.
3. The minimum requirements are given in Annex 11 which should be followed. More complex methods are also described but these remain optional. Materiality should be considered.

Chapter D.5 Estates

1. The TRAC Support costs include estates costs (or premises costs).
2. They are defined consistently for the annual TRAC process and for calculating the estates charge-out rates. They are:
   • premises expenditure (as defined in the HESA FSR – accessible from Annex 1);
   • the TRAC infrastructure adjustment; and
   • initially, laboratory technicians and all equipment and research facilities (these are then excluded from the estates costs used to calculate the estates charge-out rates).
3. They include all the costs of all support staff that relate to these areas. The cost of capital employed should not be included (it is an indirect cost).
4. Further detail of what is and is not included in estates costs is given in Part IV .
5. When attributing estates costs in the annual TRAC process, the estates costs of residences should be attributed to Other.
6. Non-residential estates costs should be attributed to central departments and to academic departments.
7. Estates costs of academic departments should be attributed to Teaching, Research and Other.
8. All attributions should be based on the use of that space.
9. No later than August 2007, the use of this space should take into account at least four different types of space. A weighted cost per square metre should be used to attribute the space used.
10. The Research estates costs should be attributed to research sponsor type; and the Teaching estates costs between PF and NPF Teaching.
11. The estates costs of central departments should be identified, and assigned to the central service department cost pools (and included in the indirect cost rates). Where central service functions such as libraries, registries, etc, are significantly devolved to academic departments, the estates costs relating to these areas could either be included in the estates total or be included in the indirect cost total.
12. Robust methods should be used to attribute shared space (e.g. laboratories used for both Research and Teaching, desk space used for all of Other, Research and Teaching activities, shared seminar rooms) both to academic departments and to activities. Shared space should be attributed on a reasonable estimate of the proportion of use of that space, not on the basis of ‘predominate use’, or a proxy based on other dedicated space allocations. Office space could be attributed using academic staff time data.
13. The use of space by PGR students should be separately identified on a fair and reasonable basis as part of this.
14. When preparing their costs for the annual TRAC return to the funding councils, institutions should ensure that the total Research estates cost that have been attributed to the PGR activity category is the same as that that could be calculated using FTE weightings of 0.5 and 0.8 for a research student in non-laboratory and laboratory departments respectively (compared to a weighting of 1.0 for an academic and research staff FTE working on Research). This is irrespective of the cost drivers that have been used in the cost allocation model when estates costs are allocated to Research.
15. Estates costs for PGR students should not be extracted separately from the estates costs of other Research activities before estates charge-out rates are are calculated.
16. Institutions should review their cost drivers for estates costs so that they are in a position to inform a UK study of PGR weightings in 2006.
17. The requirement to identify four types of space and calculate a different cost weighting for each is to ensure that departments are given the right total costs for their mix of space. Weighted space costs provide institutions with a better method of attributing space costs to departments, and between T, R, and O in those departments.
18. The four different space categories might be :
    • low-cost space (e.g. barn, shed, some animal houses)
    • desk or office
    • serviced laboratory or facility (e.g. laboratory, computer laboratory)
    • highly serviced laboratory or space (e.g. laboratory with air-conditioning, or a major facility).
19. If an institution does not have one of these types of space, they can identify only three types of space.
20. The £ per sq metre cost for each category should be calculated for benchmarking purposes – see Part II. The differentials would recognise the respective costs of building, maintaining and servicing each category of space; and their respective utilisation taking into account use by all activities.
21. A step by step approach to the attribution of estates costs is available in Annex 12 . A worked example is available in Annex 13.

Chapter D.6 Steps in cost attribution

1. The cost attribution process consists of several steps:

   set up system collect cost driver data extract and reconcile costs attribute to activities and departments calculate results test figures for reasonableness report review methods for reasonableness and amend, as appropriate

i. set up system

2. A spreadsheet or database system can be used. This would cover the following:

   Costs for attribution

   Containing:
   • list of cost totals from consolidated financial statements
   • calculation and addition of cost adjustments – see Annex 15
   • analysis into high-level accounts code groups.

   Time allocation data (note: time is a cost driver)

   Containing information from the time allocation process which shows the percentage split of time for each department between:
   • T, institution-/own-funded R, all other R, O, O(CS) and S
   • if collected, PF T, NPF T, research sponsor type, and sub-categories of S.

   Other cost drivers

   All other cost drivers would be included by department, and by activity, as appropriate, e.g.:
   • space (by department, and by activity);
   • staff numbers by department (FTE and headcount);
   • student numbers by department (FTE and headcount – split PGRs and all other);
   • research costs by department;
   • % allocations given by heads of department (e.g. for libraries, support staff, non-staff costs in their departments, external Research by research sponsor type if required);
   • numbers of Research Assistants and PGR students, by research sponsor type;
   • percentages to be used to allocate O(CS) to T, R, O and S – see Annex 10.

   Attribution to academic departments

   Academic department costs would have been attributed automatically to academic departments through their accounts codes.

   Central department groups would be attributed either:

   • automatically to O – i.e. for residences, and catering and conferences; much of Other Services Rendered and trading companies; recoverable/reimbursable salaries (medical and dental schools)
   • through application of the cost drivers – see table.

   Attribution to activities

   Most costs would be attributed to activities on the basis of their identified cost drivers.

   Some costs would have been identified as S as they were being attributed to T, R and O.

   Some would be directly attributed to activities – e.g. research grants and contracts to R; the ‘O departments’ to O; general educational expenditure to T.

   O(CS) would be attributed to T, R, O, and S on the basis of cost drivers.

   Attribution to sub-activities

   T to PF and NPF – on the basis of time (if recorded) or student numbers.

   R to research sponsor type on the basis of time (institution-/own-funded, and research sponsor type if available); and/or on the number of Research Assistants and PGR students; or (for non-laboratory departments) head of department estimates.

   Income

   As income is to be reported alongside costs in the annual TRAC return – see Annex 16 – this would usefully be included as part of the cost attribution model.

   Management information

   The ‘five figures’ for reporting would be calculated (along with the income).

   Surpluses/deficits would be calculated by activity, and, for internal information, by department as well as average T costs per student FTE; and so on.

3. Normal audit trails should be included as part of the system design to ensure data integrity, and it is good practice (periodically) to carry out an independent review of the logic etc. As part of this a running check on the totals being allocated should be done (to ensure they remain reconciled with the consolidated financial statements including exceptional items before taxation plus cost adjustments).
4. TRAC quality assurance requirements, including information on maintaining audit trails, are given in Part II.

ii. collect cost driver data

5. Cost driver data should be robust – selected and applied according to TRAC principles and conventions and recorded with appropriate audit trails.

iii. extract and reconcile costs

6. Costs should be extracted from the nominal ledger (which reconciles to the audited financial statements), and from the cost adjustments – see Annex 15.
7. Costs should be total expenditure plus exceptional items before taxation.
8. Where subsidiary companies are consolidated within institutions’ accounts their costs should be reported as part of TRAC costs. These should be attributed to T, R, O or S, on the basis of the activity being carried out in the company.
9. It is good practice for data to be collected at as high a level as possible to avoid complex data manipulation. Where data are not available at the required level (i.e. available only at an aggregate level, or at a very detailed level by accounts code) then institutions should consider:
   • using proxies (e.g. notional staff salaries to extract staff costs that require a specific attribution – e.g. 100% to R – from a general staff cost pool. The balance of costs in this pool will be attributed using the data from the time allocation schedules);
   • using data from other accounting systems – e.g. the management accounts (these might not be reconciled at all levels, but would provide, for example, a reasonable indication of the split of some costs between departments);
   • drawing from information provided for other external reporting e.g. HESA Table 6 data – accessible via Annex 1. Institutions have found the internal working papers to arrive at these HESA figures can be of use in informing their departmental split of costs, where otherwise lower-level accounts codes would need to be allocated.
10. Significant internal recharges and large adjustments in departmental costs (for example) would need to be examined to identify their purpose and relevance, and their impact on TRAC. Institutions have found that these can be significant, and unravelling them can be complex.
11. The costs would be entered into the cost allocation model and the total/s reconciled to the audited financial statements (plus adjustments). Reconciliations from cost attribution models involving significant use of management accounting information, to the published financial statements can be complex. Large cost differences can arise as accounting standards are fully applied to year-end figures, and these differences need to be identified and attributed carefully. A full audit trail should be maintained.

iv. attribute to activities and to departments

12. As shown above, costs need to be attributed to:
    • departments
    • activities
    • lower-level activities.
13. All costs should be attributed in full to all activities – no activity should be costed on a marginal basis.
14. Costs can be attributed using step-down or cascading - and this can easily become quite complex (with step-ups, and numerous iterations). A simple example here is the attribution of estates costs to a finance (administration) cost pool; and then finance to academic departments. Alternatively, finance costs could be attributed to the estates cost pool. The JCPSG publication, Costing Guidelines (page 55) – accessible via Annex 1 - illustrates this.
15. Step-down attribution is not necessary for TRAC, but could be useful if institutions wish to establish the costs of a service department to enable comparison with commercial providers or to inform pricing (for example). Use of step-down attribution might materially alter the costs attributed to activities. It is for individual institutions to determine whether step-down attribution or cascading is appropriate or necessary.

v. calculate results

vi. test for reasonableness. See Part II

vii. report

viii. review methods for reasonableness and amend as appropriate.

Section E: Cost adjustments

1. This is part of the pyramid of costs

   Cost attribution to activity
   Time allocation to activity

2. Two cost adjustments should be made to the costs in institutions’ financial statements to produce the full economic cost total used in TRAC. These are the:

   infrastructure adjustment; and

   cost of capital employed

3. Guidance on these is given in Annex 15.
4. A third cost adjustment – exceptional items – was used in the initial introduction of TRAC but no longer applies.
   

Section F: Income allocation

1. The Funding Councils require income to be reported alongside costs in the annual TRAC return. Guidance is given in Annex 16.
2. These methods can provide allocations that are useful for quality assurance – understanding results, testing for reasonableness and benchmarking results – as well as for internal planning and resource allocation.