JCPSG | TRAC Guidance

Part IV - Charge-out rates

Section A: Overview

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

Indirect costs

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

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

Estates costs

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

The application of these rates

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

Other directly allocated costs

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

Section B: Minimum requirements

  1. The minimum requirements are that:

Section C: Full-time equivalents

Chapter C.1  What they are

  1. Full-time equivalents (FTEs) is a figure that is used for many purposes for TRAC. It can consist of some or all of the following:
    • academic staff FTEs, made up of:
      • time on R
      • time on T
      • time on O
      • time on S
    • research staff FTEs
    • taught student FTEs
    • PGR student FTEs.
  2. Within TRAC, FTEs are used for four purposes. The precise component of the FTE figure will differ for each:
    • a cost driver of some central service department costs, whereby Support costs are attributed to academic departments, and to Teaching, Research and Other.

      Student numbers (taught and PGR) are added to staff FTEs for many of these attributions.

    • the denominator (bottom-line) of the estates cost calculations, leading to the estates charges per FTE.

      For the Research estates charges, PGR student numbers are added to the research time (FTE) of academics, and research staff FTEs. For Teaching estates charges the denominator might be taught student FTEs.

    • the denominator of the indirect cost calculation, leading to the indirect cost rate per FTE.

      For the Research indirect cost rate, PGR student numbers are added to the research time (FTE) of academics, and research staff FTEs. For Teaching indirect cost rates the denominator might be taught student FTEs.

    • for planning the staff who are to complete academic time allocation schedules for the annual TRAC time allocation exercise (academic staff FTEs would be used for this); for confirming the robustness of the sampling or response rates; and to help when reconciling costs charged to projects with costs collected under TRAC.

Chapter C.2 Use in setting rates

  1. FTEs are used in the calculation of the indirect cost rate and estates charges for Research, and in the application of these rates. The same definition should be used both for the calculation and the application. Therefore, the FTEs used in the denominator of the rate calculations should be the same as those which potentially can be charged to research projects, on which indirect costs/estates costs can be charged and then (potentially) recovered from research project sponsors.
  2. The definition of the relevant FTEs for use in setting rates for Research is:

    the full-time equivalent of the time of all academics working directly on Research (including external projects, institution-/own-funded research activity and the supervision of research students). This is the same time that would be chargeable to a research project (or equivalent, for institution-/own-funded research and PGR supervision);

    the supervision of research students (PGRs) and institution-/own-funded time should be included alongside time chargeable to research projects. They are direct research activities considered in TRAC to generate or potentially generate income;

    the full-time equivalent of research staff (research assistants, fellows) whose time is being charged to research projects or who are carrying out institution-/own-funded research or supervising research students;

    the full-time equivalent number of PGRs, weighted;

    and all these figures should be for the same year that is providing the costs (included in the numerator of the indirect cost rate and estates charge calculations).

  3. Some staff are not on academic or research grades but may be charged as a researcher on a research project. Definitions are given in document link Annex 6. Their Research time should be included in the Research FTE total.
  4. Support staff (e.g. technicians and clerical staff) should not be included in the FTE numbers.
  5. FTEs for academic staff should be derived from the annual TRAC process. Academic staff time will have been allocated to Teaching, Research, Other and Support based on the results of the annual TRAC academic time allocation exercise. That element of their time that has been allocated to Research should be included in the FTE figure for Research. Support time for Research, or general Support time, should not be included in the FTE figure for Research.
  6. In general, research staff FTEs are not included in the annual academic time allocation exercise: their time is wholly chargeable to Research (it is wholly included on a research project, even when it includes some Teaching or Support time). For these staff, all of their time should therefore be included in the FTE count.
  7. RAs may be ‘between projects’, or otherwise not employed on a specific research contract for the year being studied. They might mainly be undertaking institution-/own-funded Research. If so, 100% of their time should be included in the FTE count. Otherwise their time should not be included in the FTE count – see support staff.
  8. In practice, a default assumption could apply, that RAs have been engaged wholly or significantly on Research (in line with duties of other RAs engaged on research projects). A note could be sent to relevant heads of department each year asking them to indicate where this was not the case.
  9. FTEs for academic and research staff should be calculated by:

    obtaining an average FTE for academics and research staff for the year for each department (which would include time spent on all activities – Teaching, Research, Other and Support);

    assigning to Research all of the time of research assistants and research fellows whose time has been charged 100% to a research project;

    calculating the proportion of time that academics spend on Research, by:

    *   taking the % of time that academic FTEs have spent on Research, from the TRAC time allocation schedules;

    *   applying this Research % to the average FTE number for these academic staff;

    then adding these two figures (RAs and fellows, and Research time of academic staff)

    to provide the FTE staff numbers for Research.

  10. This FTE staff number for Research should not include the time spent on Support for Research or general institutional support, scholarship, etc.
  11. It should include the Research time of any staff deemed to be researchers on a research project.
  12. A robust method should be used to establish staff FTEs e.g. pay or personnel records on numbers of staff, by department, at the beginning of a month. If this cannot provide data on all researchers, other methods that provide fair and reasonable figures can be used, e.g.
    • the research project or costing records which provide salary costs for RAs, could be divided by an annual cost per RA to provide an estimated RA FTE;
    • costs of visiting academics and other non-permanent staff could be divided by an annual cost per academic to provide an estimated FTE. However, the FTEs of visiting researchers should only be included where their institutions do not make a charge to the lead institution for indirect and estates costs that is then charged to the project.
  13. Staff FTEs should be established in a robust way no later than 1 August 2007 (and used to allocate 2006/07 costs).
  14. The FTE numbers on pay or personnel records may need review and adjustment. Institutions should consider the further analysis that is necessary to ensure full robustness. Depending on the coding and structure of the current system, this might include, for example:
    • identification and clarification of the treatment of employees who are on temporary contracts, on fees basis and casuals (who may or may not generally be included in the cost drivers). Whilst doing this, clarification of the use of the term ‘temporary’ may be required;
    • identification and allocation of employees on maternity, paternity and long-term sickness leave – see document link Annex 9;
    • identification and appropriate treatment of other staff who work on institutional projects but are not paid through the institution’s books (e.g. some visiting academics or visiting fellows);
    • reviewing staff classifications, such as academic, RA, technician and other (existing use of the term ‘researcher’ or other types of staff may need to be reviewed);
    • sorting employees by department (perhaps requiring a re-alignment with the department accounts code for where the salaries are charged, as opposed to the department where the staff member was originally employed).
  15. These adjustments might be identified though a critical review of an employee list by each head of department. They need be made only if they are likely to lead to a material change in the FTE numbers calculated for attributing:
    • to Research (or Teaching, or Other); or
    • to each research sponsor group; or
    • between laboratory and non-laboratory departments.
  16. However, if the institution wishes to calculate estates charges and indirect cost rates at lower levels than this, materiality requirements will alter. If estates charges or indirect cost rates are calculated at the level of individual department, or by type of staff, then data should be robust at these levels. (It is not, however, a minimum TRAC requirement to calculate charges or rates at these lower levels.)
  17. To be robust:
    • the pay or personnel records should be sampled on at least two points during each year, chosen to ensure that the average is a fair and reasonable summary of average staff numbers over the year. (If the average is based on data at the beginning and end of each year, then the institution should confirm that the patterns of employment over the rest of the year are materially similar);
    • if not available through the pay or personnel records, research staff FTE numbers should be established through a robust method such as a survey of academic heads of department or a robust examination of research project records;
    • the FTE figures used to calculate the charge-out rates should be reconciled to the average employee statistics which are included in institutions’ audited financial statements;
    • calculations of the average FTEs for visiting researchers, lecturers and other non-permanent staff, if not available on the pay or personnel records, should be reviewed by appropriate academic managers for reasonableness; and the attribution of these FTEs to Teaching, Research or Other should be confirmed by them;
    • the institution should take an informed view on whether non-laboratory work in laboratory departments is broadly equal to laboratory work in non-laboratory departments;
    • if not, then heads of department should identify desk-based work in laboratory departments and vice versa:
      • those in laboratory departments should estimate how many research projects (perhaps expressed as a percentage of total research work in their department) do not use any laboratory facilities (e.g. a desk-based project in a laboratory department);
      • heads of non-laboratory departments should estimate the proportion of research activity that is reliant on laboratory or other major facilities to the same extent that a normal project in a laboratory department would be;
    • heads of all departments should also identify the proportion of research activity that is carried out completely outside the institution; and the FTEs of staff from partner and other organisations who are using institutional facilities (where these are not being directly charged). Staff working permanently off-campus should be excluded from the estates rate calculation, but left in the indirect cost rate calculation;
    • the treatment of the following should be carefully reviewed, where material:
      • the FTE of fellows, emeritus professors, visiting staff from industry, and temporary lecturers (for Teaching) should be included;
      • the Research FTE of clinical academics should be included irrespective of whether their salaries are wholly or partly reimbursed;
      • where clinicians’ salaries are not paid by/through the university, either the time that they spend on Research should be included, or the O(CS)(R) time of the university’s clinical academics (but not both).

    Materiality should be considered for these complex areas.

  18. Institutions can use other methods if they consider these to be as robust.
  19. Indirect cost rates and estates charges for Research apply to PGR student FTEs as well as to researchers. PGR students should be included in the FTE numbers. PGR FTEs could be obtained from the student numbers report prepared from Registry data in December each year.
  20. Weightings are to be applied to PGR FTE numbers. Weightings reflect the fact that some of the Support activities or resources allocated to Research may be providing a higher level of support to an academic or research member of staff than to a PGR student – e.g. academics‘ time on scholarly activities, office space, or departments’ Support staff.
  21. When charge-out rates are calculated and applied to PGR FTEs the following weightings should be applied:
    indirect0.2
    laboratory estates0.8
    non-laboratory estates0.5
    compared to that applied to the FTE of academic/research staff of1.0
  22. A UK review of these weightings is being carried out in 2006 which will draw upon better evidence from institutions. The JCPSG considers it likely that this evidence will indicate the need for higher weightings.
  23. Part-time PGRs should be included proportionally to these weightings. PGRs on ‘writing up’ only registrations should not be included.
  24. FTEs should be converted from/to days or hours using the standard working hours assumption – 1650 hours a year.
  25. FTE numbers are established for one year (e.g. 2004/05) for use in the allocation of costs, and the calculation of indirect cost rates and estates charges based on that same year’s (e.g. 2004/05) costs. These rates and charges, indexed, are then applied to projects for the following year (e.g. from 1 February 2006). This calculation would not then be repeated using the same year’s data (2004/05 in the example above: it would next be carried out on 2005/06 data for application from February 2007).

Section D: Indirect cost rate

  1. Indirect costs are not directly related to any one project or activity. However, they are a necessary part of the costs of undertaking an activity. Their costs therefore need to be attributed to projects in order to calculate a fEC. This is done through a proxy – staff and student FTEs. An indirect cost rate for Research is calculated by taking the total indirect costs for Research, and dividing it by Research FTEs. The resulting rate is quoted as a  £ per FTE. This is then applied to the number of FTEs on each project, to provide the indirect cost charge for that project.
  2. This method of calculating an indirect cost rate acknowledges that the number of people – academics, research staff and students – is one of the key drivers of indirect costs. Methods other than a £/FTE should not be used (for example, a percentage of direct staff salaries).
  3. This section focuses on the indirect cost rate for Research. Full robustness in the data and calculations should be achieved by the beginning of August 2007 (2006/07 data, applied to research projects from February 2008). In particular this requires FTE numbers to be calculated robustly.
  4. The indirect cost rate should be historically based. For example, data from the 2004/05 year (included in the annual TRAC report submitted at 31 January 2006) is used to produce the rates applied from 1 February 2006 to 31 January 2007.
  5. Rates should be calculated once a year, and apply from the 1 February of a year for the following 12 months. Institutions that are unable to calculate updated rates on 1 February of a year can continue to use their previous year’s rates (but without further indexing). When their new rates are available these would be applied to research projects until the following 31 January. The fEC-based price calculated on projects already being reviewed by sponsors will not, however, be changed. Therefore, it is not a TRAC requirement to re-cost these projects with the latest rates, although this is good practice. If new rates are not available by 31 July of Year 2 (i.e. 18 months after 1 February of Year 1 when they first were applied) then the non-compliant rates apply, until the rates are recalculated.

Chapter D.1  Indirect cost total

  1. Indirect cost totals for Teaching, Research and Other should be established. The indirect cost total should not include any Research cost that:
    • was charged directly to projects in the prior year as a directly incurred or directly allocated cost; or
    • is covered by the estates charges; or
    • is contained in a charge-out rate (equipment or laboratory technicians); or
    • is a scholarship, bursary or fee remission for PGR students.
  2. The indirect costs that should be included in the rates are therefore those that are currently defined as Support costs within annual TRAC, with the following exceptions. The following should not be included in the indirect cost rate:
    • the estates costs of academic departments;
    • laboratory technicians’ costs;
    • the costs of equipment in academic departments;
    • scholarships/bursaries.
  3. The indirect cost totals should therefore include:
    • the Support time (cost) of academics
    • clerical and administrative staff in academic departments*
    • non-staff costs in academic departments*
    • central services including academic services such as the library and learning resources
    • the estates cost for central service departments
    • the gross cost of capital employed, incorporating interest and restructuring costs.

      * These costs exclude any that have been directly charged to a project.

  4. By definition, the Support time/cost of academic staff already excludes time/cost that has been charged to a project or is otherwise a direct Teaching, Research or Other activity. Clerical staff and non-staff costs in academic departments that have been charged to a research project as a directly incurred cost should be excluded.
  5. Indirect costs could include generic IT costs (or these could be directly allocated, or included in the estates charge).
  6. Indirect costs used to calculate the indirect cost rates should include the indirect costs of PGR students.
  7. Indirect costs that have been charged to projects during the year (e.g. during 2004/05) are not relevant to the calculation of subsequent indirect cost rate calculations (e.g. rates calculated on 2004/05 costs, applied from 1 February 2006 should be based on total indirect costs actually incurred in 2004/05, irrespective of any recovery in 2004/05).

Chapter D.2 Calculating rates

  1. Indirect cost totals for Research are divided by FTEs to produce an indirect cost rate for Research.
  2. FTEs – of academic staff, research staff, and PGRs – were defined in Chapter C.1. This will not be the same FTE total that is used in the calculation of the estates charges as:
    1. PGR numbers are weighted at 0.2 (weightings in the estates charges are different from this);
    2. some FTEs that are included in the indirect cost rate may not be in the estates rate, in particular where staff are working wholly off-campus;
    3. in the estates calculations, FTEs are shown as a total for laboratory departments, and a total for non-laboratory departments, as two different estates charges are calculated. For indirect costs, only one rate is calculated, therefore there is no distinction between laboratory and non-laboratory departments.
  3. Technical and clerical staff FTEs should not be included in the denominator.
  4. Only one generic institutional rate per academic/researcher need be calculated but institutions can introduce additional rates if they wish.   This rate, when applied to PGR students, should be multiplied by 0.2 (the same weighting used on PGR student numbers in the original calculation).
  5. The £/FTE should be converted from/to £ per day and £ per hour, on the basis of 1650 standard working hours in a year (e.g. 220 standard working days; 7.5 hours in a day).

Chapter D.3 Applying the rate

  1. The £/hour or £/FTE indirect cost rate should then be applied to the academic hours/FTEs and research staff FTEs which are estimated for a research project. It should also be applied to the FTE of PGR students, where they are formally recognised as part of the research team by the sponsor (the project studentships) and if the institution wishes to include their costs in the project cost totals. When applied to a PGR FTE the indirect cost rate should be weighted by 0.2.
  2. Institutional rates would be applied as part of the project costing (estimating) process carried out pre-application. They should then be recorded against each project during its life. These costs would be charged to sponsors on cost-based price grants and contracts.
  3. Under TRAC, no updating for actual indirect costs or rates need be recorded during the project life – this would not be recognised for cost-based pricing for PF sponsors. However, when cost-based pricing, indirect costs charged to a project should be reviewed and updated (for latest estimates) if there is a substantial change to the programme of work.
  4. Initially based on a prior year’s cost totals, indirect cost rates should be indexed to current price levels.   Therefore rates based on historical costs should be indexed (by two years’ price levels) to provide a reasonable estimate of first year (‘base year’) costs for research projects. Further indexing of these base year costs should then be done throughout the life of the project.
  5. There will be an over or under-recovery of indirect costs in any one year. This should not be taken into account in the calculation of the indirect cost rate based on that particular year’s figures.
  6. When applying a rate to the time of an academic or member of research staff on a project:
    • if an academic has allocated time to a project, then the indirect cost rate should be applied to that time, irrespective of whether there is a salary also allocated to the project (e.g. visiting academic);
    • the rate calculated for the academic/research staff’s own discipline group/institution should be applied, irrespective of whether the project is being led by or taking place in another institution or off-campus. Where an academic is allocating time to a project but no salary is paid by the HEI (e.g. for some visiting professors), then an indirect cost should still be allocated;
    • on collaborative projects between institutions, or where there is a visiting academic on a project, indirect costs might be charged from the collaborator to the lead institution. This recharge can be based on either the collaborator's rate; or alternatively, the indirect cost rate for the employer of the majority of the staff could be used for all staff. Where costs are recharged:
      - the indirect cost rate applied to the collaborating institution's FTEs on the project should reflect the costs being recharged, and
      - the visiting staff FTEs should not be included in the denominator when calculating the lead institution's indirect cost rates.

      Where costs are not being recharged from the collaborator to the lead institution, the lead institution's own rates should be charged. In this case the FTEs would be included in the denominator when calculating the lead institution's indirect cost rates;
    • where a research fellow or RA is working on the project, but their time has already been wholly (100%) included in another single fellowship or research project (from the research councils, charities or OGDs), then no time will have been allocated to the new project. No indirect cost rate will then be applied in respect of that researcher (their ‘share of indirect costs’ would have been included on the initial fellowship or research project). This is irrespective of how the initial fellowship or research project was funded.

Chapter D.4 Alternative methods

  1. Whilst only one generic institutional rate (£ per academic/research staff) need be calculated, different rates could be used for different types of staff, or for different departments. If so, institutions should ensure that:
  2. the size of these differentials reflects appropriately the real drivers of the costs;
    • the FTE data, and the costs, should be robust at these lower levels (rather than for all academic staff working for each research sponsor type for each discipline group);
  3. The two main options are:

    Grade of staff

    • The indirect costs on a project are unlikely to be affected materially by the grade of staff. (Even Support time, which does vary according to salary level, is mainly comprised of the costs of management and administration that should be spread across all projects, not just the one that the individual is working on).

      Institutions might therefore feel that it is not material to calculate and apply a different rate for each grade of staff. This would be more complex than a single grade rate, and require higher levels of robustness in the annual time allocation process.

    Clinical medicine and dentistry

    • However, staff in some departments may be more productive than others (their direct time is significantly higher, and their Support time is significantly lower). This may be the case particularly in clinical departments, reflecting the different working arrangements. It is good practice for institutions with clinical medical or dentistry departments to review this and, if appropriate, to calculate a separate indirect cost rate for those departments.
  4. However, when doing so, it is good practice to ensure that the treatment of O(CS) will result in full recovery of indirect costs. Two types of recharges to Research can be made from: O(CS), reflecting Research services received from clinicians; or O(CS)(R) reflecting the Research work carried out by academic clinicians at the same time as clinical services. 
  5. Institutions should only include any of this time as direct Research time (for the purposes of calculating the FTEs, and thus the indirect cost rate) if they are sure that this type of time is the same as might potentially be entered on project costing forms for Research projects – either by clinical academics or by clinicians (under knock-for-knock).

Chapter D.5 Justification

  1. If an institution’s indirect cost rate falls above the upper quartile of the sector rates, then they should be prepared to justify this higher rate, or use a lower non-compliant indirect cost rate (specified by the Office of Science & Technology/ Research Councils) if lower than their rate.
  2. This decision should apply for one year, across all projects in that institution. Part of the reason for a higher rate might, for example, include definitional issues where fewer costs are being claimed as direct; part might relate to efficiency or a wide range of historical or other reasons.
  3. An acceptable method for justifying a higher rate is described under external quality assurance.

Chapter D.6 Application to T and O

  1. Indirect cost rates can also be established, using the above techniques, for Teaching and Other activities. The indirect cost totals for each of these, by department, would have been calculated using the same method as that for the indirect cost total for Research.
  2. The indirect cost total for Teaching could then be described in terms of a £ per student (for all Taught students, or by discipline group, or by department). This would then facilitate the use of an indirect cost rate in course costing, using the same methodology as for Research.
  3. The indirect cost total for Other would include costs for residences and catering. Excluding these, the costs of Other activities in academic departments could also be described in terms of a £ per staff FTE.
  4. There are no mandatory requirements in this area – see Part VI.

Section E: Estate charges

  1. The space used by a project or activity is a specific resource that can be linked to that activity. The costs of this space – estates costs – need to be allocated to that activity. This can be done using a measure of the space used. These measures, called estates charges, can be:
    • quite specific (e.g. square metres used for a certain number of days); or
    • a proxy, such as a £ charge for each FTE using that space.
  2. Sometimes a combination is used. In either case, the allocation needs to reflect both the space actually used by that project, and the surrounding space (workshops, secretarial offices, academic offices, etc.).
  3. The most common type of estates charges, and perhaps one of the least onerous to calculate and apply, is a £ charge for each FTE using that space. This is acceptable for TRAC. It is the focus of the following paragraphs.   Other methods are discussed in Chapter E.4.
  4. This section focuses on the estates charges for Research. Full robustness in the data and calculations should be achieved by the beginning of August 2007 (2006/07 data, applied to research projects from February 2008). It particularly requires:
    • full-time equivalent numbers to be robustly calculated;
    • estates costs which have been attributed between Teaching, Research, and Other activities, and academic departments, on the basis of usage to take account of the levels of cost of different types of space.
  5. It is good practice for an institution:
    • to introduce fully robust methods sooner than August 2007;
    • to ensure that the estates charging methods they introduce assist in their internal space management, resource allocation and sustainability processes.
  6. The estates charges should be historically based. For example, data from the 2004/05 year (included in the annual TRAC report submitted at 31 January 2006) is used to produce the estates charges applied from 1 February 2006 to 31 January 2007. As with indirect cost rates, estates charges can be used for up to 18 months (until 31 July of the following year) – after that time, until they are re-calculated, non-compliant default rates should be charged.
  7. Estates charges should be calculated once a year, and apply from the 1 February of each year for the following 12 months.

Chapter E.1 Estates cost total

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

Chapter E.2 Calculating charges

  1. Estates charges for Research can be applied on a £ per FTE basis. This chapter describes the minimum requirements when using this method.
  2. Estates cost totals for Research are divided by Research FTEs to produce the estates charges for Research.
  3. FTEs – of academic staff, researchers, and PGRs - were defined in full time equivalents. This will not be the same FTE total that is used in the calculation of the indirect cost rate:
    • PGR weightings in the estates charges are different from those used in the indirect cost rates;
    • some FTEs that are included in the calculation of the indirect cost rate may not be in the calculation of the estates charge, in particular where staff are working wholly off-campus;
    • in the estates calculations, FTEs are assigned to either laboratory departments, or to non-laboratory departments, as two different estates charges are calculated.
  4. Technical and clerical staff FTEs should not be included in the denominator.
  5. Two estates charges should be calculated – one for laboratory departments, and one for non-laboratory departments. It is good practice to review the need for a third charge – a clinical estates charge – where institutions have clinical departments of medicine or dentistry.
  6. If an institution does not do any laboratory-based Research, then the non-laboratory estates charge only would be calculated (and vice versa).
  7. Institutions may calculate and apply different estates charges for each department or management unit or type of staff, if they wish.
  8. Weightings are to be applied to PGR student FTEs when included in the denominator of the estates charges calculations. These are 0.8 for laboratory subjects, and 0.5 for non-laboratory subjects (compared to 1.0 for an academic/research staff FTE).
  9. The £/FTE should be converted from/ to £ per day and £ per hour rates, on the basis of 1650 standard working hours in a year (220 standard working days; 7.5 hours in a day).
  10. The calculation of the non-laboratory (or generic) estates charge is:

    the estates costs for Research in non-laboratory (e.g. social sciences, mathematics and humanities) departments, including the costs of space used by PGR students in those departments

    divided by

    the number (FTEs) of academic and research staff working on Research in those departments, plus PGR student FTEs in those departments weighted by 0.5

    to give a £/FTE non-laboratory estates charge

  11. The calculation of the laboratory estates charge is:

    the estates costs for Research in laboratory departments (excluded from the estates costs used in the non-laboratory estates charge calculation, above)

    divided by

    the number (FTEs) of academic and research staff working on Research in these laboratory departments, plus PGR student FTEs working in these laboratory departments weighted by 0.8

    to give a £/FTE laboratory estates charge

  12. ‘Laboratory departments’ can be defined institutionally, but would normally include any department with significant equipment or facilities requiring additional space and servicing, above that of a typical social sciences, mathematics or humanities department.
  13. An FTE should either be in the laboratory estates calculation or in the non-laboratory estates calculation, but not both.   The FTEs used in the laboratory calculation, when added to the FTEs used in the non-laboratory calculation, should use the same FTEs data that were used in the indirect cost rate calculation. These should be reconciled.
  14. Some staff in laboratory departments may be working on a wholly desk-based (non-laboratory) project. Their FTEs should have been moved from the laboratory department FTE total to the non-laboratory department FTE total, when calculating the estates rates - see FTEs. It is not necessary, however, to move 'their share' of laboratory department costs to the non-laboratory department cost total, when calculating the rates. The above also applies when non-laboratory staff work on laboratory project.

Chapter E.3 Applying the £/FTE rate

  1. The non-laboratory estates charge should be applied to the academic and research staff FTEs working in non-laboratory (social sciences, mathematics and humanities) departments and which are estimated for a research project. The laboratory estates charge should be applied to the academic and research staff FTEs working in laboratory departments and which are estimated for a research project.
  2. They should also be applied to the FTE of PGR students, where they are formally recognised as part of the research team by the sponsor (the project studentships) if the institution wishes to include their costs in the project cost totals.
  3. When an estates charge is applied to a PGR FTE it should be weighted to reflect the PGR weightings built into the calculation above. (So a PGR student in a non-laboratory department would have been weighted at 0.5 in the calculation and academic staff remaining unweighted at 1.0. Therefore, the resulting charge of £x/FTE would then be multiplied by 1.0 for academic staff and 0.5 for PGR students when applied to the FTEs charged against a project or individual studentship.)
  4. These estates charges would be applied during the project costing (estimating) process carried out pre-application. They should then be recorded against each project during its life. These costs would be charged to sponsors on cost-based price grants and contracts.
  5. No updating for ‘actual’ (estates use, costs or rates) need be recorded during the project life – they would not be recognised for cost-based pricing for PF sponsors.
  6. However, when cost-based pricing, estates costs charged to a project should be reviewed and updated (for latest estimates) if there is a substantial change to the programme of work.
  7. A record of actual use of space by each project is not required. However, appropriate records of overall usage by activity should be kept to provide a robust audit trail supporting the annual calculation of the estates charges.
  8. There may be an over or under-recovery of estates costs in any one year. This should not be taken into account in the calculation of the estates charge or indirect cost rate based on that year’s figures, nor in the calculation of any subsequent year’s estates charges.
  9. Initially based on a prior year’s cost totals, estates charges should be indexed to current price levels.   These should be indexed (by two years’ price levels) to provide a reasonable estimate of first year (‘base year’) costs for research projects. Further indexing of these base year costs should then be done throughout the life of the project.
  10. When applying an estates charge to academic or research staff time on a project:
    • on any project where a laboratory, major facility or equipment is in use, and their use is significant, then the laboratory estates charge should be applied;
    • if an academic in a laboratory department is working on a desk-based project, then the non-laboratory estates charge, not the laboratory estates charge, should be applied.
    • if all of the work is taking place off-campus, then no estates charge should be applied. (A direct cost may or may not be charged to the institution, and therefore to the project, from the off-campus facilities provider);
    • it is good practice for the charges to reflect the location where each member of staff is working. However, the same laboratory (or non-laboratory) estates charge could be applied to all staff on a project designated as ‘laboratory’ (or not), irrespective of the time each individual actually spent in the laboratory or in their office on that project. Where staff are based in different departments and the institution has calculated different department estates charges for each, then the charge calculated for their department should be applied;
    • on collaborative projects between institutions, the estates rates charged by staff should reflect the costs relevant to the location of the work being done, irrrespective of which institution is the lead institution. However, an estates charge could be used for all staff that represents the location where the majority of the work is being carried out. If the work is taking place equally across the institutions then each institution’s own rate would be applied.
    • on collaborative projects between institutions, or where there is visiting academic on a project, and work is based at the collaborating institution, not the lead institution, estates costs might be charged from the collaborator to the lead institution. If so:
      • the estates rate applied to the collaborator to lead institution‘s FTEs on the project should reflect the costs being recharged, and
      • the visiting staff FTEs should not be included in the denominator when calculating the lead institution‘s estates rates.

      where costs are not being recharged from the collaborating institution to the lead institution, next time the rates are calculated by the lead institution, the FTEs of the visiting staff would be included in the denominator;

    • where a research fellow or RA is working on the project, but their time has already been wholly (100%) included in another single fellowship or research project (from the research councils, charities or OGDs), then no time will have been allocated to the new project. No estates charge will then be applied in respect of that researcher (their ‘share of estates costs’ would have been included on the initial fellowship or research project). This is irrespective of how the initial fellowship or research project was funded;
    • an estates charge should be made for the time of staff working in a laboratory facility owned by the university, irrespective of the funding of that facility.

Chapter E.4 Alternative methods

  1. The focus of the above chapters was on a method of allocating estates using two estates charges each expressed as a £ per academic/research staff. This is acceptable for TRAC.
  2. Institutions can alternatively use different methods to attribute estates costs to research projects, as long as they are at least as robust as the £ per academic method. Alternatives include the following:

Modifying the £ per academic charges

Project-specific methods

  1. Some of these alternative methods mean that estates charges are being set at a lower level than that of the laboratory/non-laboratory groups of departments, e.g. at the level of department, or grade of staff. If this is the case, then institutions should ensure that the annual time allocation processes will provide robust data to inform the FTE counts at this lower level.
  2. These methods should recognise the use of space on institution-/own-funded Research, and by PGR students. These should be informed by robust analysis of the space required for each activity and by each type of user. If these project-specific methods lead to the space allocated to a PGR student representing less than 0.8 of that for a Research Assistant in a laboratory department, or less than 0.5 of that for a Research Assistant in a non-laboratory department, then the institution should be prepared to justify this to their PGR funders.
  3. Institutions can change their methods over time, but estates charges can only be set once a year (1 February).
  4. Institutions should also be prepared to benchmark their estates figures on a common basis, irrespective of the type of estates charge that they actually use. Benchmarking is part of the external quality assurance process.
  5. It will be done on the basis of:
    • two estates charges, laboratory and non-laboratory, expressed as a £ per academic/researcher. Clinical charges may be collected as well (if used by institutions). If more estates charges than this are being used by an institution, these should be aggregated into the laboratory and non-laboratory charges;
    • the £ per sq metre for each of the four (or more) categories of space. (This data may not be available until the end of 2007, as it only needs to be implemented by 1 August 2007.)

Chapter E.5 Justification

  1. If one of an institution’s estates charges falls above the upper quartile of the sector rate, then they should be prepared to justify this higher charge, or they have to apply the non-compliant default rate, set at zero.
  2. This decision should apply for one year, across all projects in that institution. Part of the reason for a higher rate might, for example, include definitional issues where fewer costs are being claimed as direct; part might relate to efficiency or a wide range of historical or other reasons.
  3. A method for seeking to justify a higher charge is described under external quality assurance.

Chapter E.6 Application to T and O

  1. Estates charges can also be established, using the techniques above, for Teaching and Other activities. The total estates costs for each of these activities by department, would have been calculated as the estates costs for Research were derived.
  2. The total estates costs for Teaching could then be described in terms of a £ per student (for all Taught students, or by discipline group, or by department). This would then facilitate the use of an estates charge in course costing, based on the same costing methodology used for Research – as described in chapters E.2, E.3 and E.4.
  3. The total estates costs for Other would include those for residences and catering. Excluding these, the estates costs of Other activities in academic departments could also be described in terms of a £ per academic staff FTE.
  4. There are no mandatory requirements in this area – see Part VI.

Section F: Default rates

  1. Some institutions do not have robust methods for calculating either their indirect cost rate or their estates charges, or both. This may be identified through the 2004/05 external quality process, or other part of the quality assurance processes.
  2. Until they take action to introduce robust methods for calculating the indirect cost rate, they should apply the non-compliant default indirect cost rate (or their own rate, whichever is lower).
  3. Until they take action to introduce robust methods for calculating the estates charges, they should apply the non-compliant default estates charge (which is set at zero).
  4. Institutions who are eligible for dispensation and who wish to take up this dispensation, may apply the dispensation default indirect cost rate and the dispensation default estates charge.
  5. The default rates are announced by the OST/Research Councils. These may be recalculated, or indexed year on year. Institutions may have to declare that they are applying the default rate/s.
  6. An institution using a default rate at the start of a year, but that then introduces fully robust systems in that year, can start to apply their own rates from 1 February of the next year.

Section G: Other Charge-out rates

  1. Directly allocated costs, such as estates, are costs of services used by a project, where the services are shared by other activities and projects. The project’s use of the service is estimated (e.g. in terms of units of time), and a standard charge-out rate per unit is applied to arrive at a directly allocated cost for that project.
  2. Two types of cost – laboratory technicians and major research facilities – can remain part of estates costs until 1 August 2007, but should then be directly allocated to projects. Charge-out rates (e.g. expressed as £ per FTE, or £ per hour of facility usage) are used to do this.
  3. Academic staff costs are also directly allocated costs applied to projects using daily charge-out rates – see Part V  Chapter C.3.
  4. Where a cost is allocated directly to research projects, this method should be used for all activities and projects – no part of that cost should be included in the indirect cost rate nor included in another directly allocated cost such as estates.
  5. Directly allocated costs should be recorded against the project during its life. The standard charge-out rate, used to estimate costs of a project pre-award, would give the amount to be recorded.
  6. Records of overall use of each facility should be kept at a level that will provide information for calculating the charge-out rates. However, records of actual usage by project need not be maintained, even though it is good practice for a system to record this as they provide good records to use for estimating future years’ utilisation (and, therefore, increase the robustness of charge-out rate calculations). If actual usage on each project is recorded, then the estimated charge on those projects could be amended to reflect their actual usage. This should only be done where this is considered practical and material, and is not too onerous a task in practice. Subsequent years’ charge-out rates or changes (due to differences between estimated and actual costs or utilisation) need not be recorded under TRAC (updated rates will not form the basis of funding by most sponsors).
  7. This section focuses on charge-out rates used to cost research projects; however, the same principles and techniques could be used for Teaching and Other activities.
  8. The first chapter focuses on laboratory technicians, but could also be applied to clerical staff.

Chapter G.1 Laboratory technicians

  1. Where technical staff work directly with researchers or in support of their rooms or equipment on laboratory projects, costs should be directly charged to projects no later than 1 August 2007. (I.e. estates charges or indirect cost rates based on 2006/07 costs should not include these items, and they should be charged directly to all relevant projects from 1 February 2008.)
  2. The direct charges will be of either of two types:
    1. if the staff are dedicated to a project, and/or project timesheets will be completed, these costs should be charged as they are incurred (on the basis of those timesheets);
    2. if the staff are part of a shared or pooled team, an appropriate part of these staff costs should be directly allocated to all projects.   A charge-out rate, such as £ per academic/research staff, is used for this.
  3. Staff who are shared between projects, or part of a pooled team, (ii) above, might be:
    1. working on several projects. Where it would be inappropriate for them to complete timesheets – if they did, they could be treated as a directly incurred cost – their costs should be directly allocated to projects;
    2. providing services to laboratories including in health and safety, storeroom/supplies, hazardous materials handling, laboratory equipment maintenance, carpentry or in administration. Again this time should be directly allocated to projects.
  4. All of the time of the staff in (a) and (b) should be directly allocated, including an appropriate part of their general duties, administration, supervision, etc. To this should be added any support time of technicians completing timesheets which is then not being charged as a DI cost to projects ((i) in the paragraph above). Staff costs can be grouped for the purposes of making the charge; and types of staff or individuals need not be identified.
  5. The estimated costs of shared, pool, or directly allocated, staff should be recorded as a cost against each appropriate project periodically throughout the project life. The charges applied to each project need not be updated during the project life (except for the annual indexing built into the original estimate), unless there is a substantial change to the programme of work.
  6. It is good practice for these dedicated technician staff to be charged to projects earlier than August 2007.
  7. Actual time spent on supporting each project need not be recorded. However, it is good practice periodically to survey total time spent supporting a group of projects, on a sample basis, to provide data that can be used to establish the standard charge-out rates for pool staff in their support of different types of project (and activity).
  8. It is good practice for institutions to produce costing schedules that provide a simple guide to the levels of costs that might be appropriate to charge for different types of project.
  9. Estates charges and indirect cost rates should not be applied to the time of technician and Support staff, when calculating the estates and indirect cost totals for a project.

Identifying the costs of directly allocated technicians

  1. The total costs of laboratory technicians should be established and directly charged. These costs should therefore be excluded from estates costs, no later than 1 August 2007.
  2. The minimum requirement focuses on types of technician who are in laboratory departments but are not in non-laboratory departments. However, institutions can define technicians in a more inclusive way if that is more useful to them. They can be:
    • specific staff or posts of technicians who are in laboratory departments, but not generally in non-laboratory departments;
    • all technicians in laboratory departments; or
    • all technicians in both laboratory and non-laboratory departments (different charge-out rates would then be required for each type of department) e.g. IT technicians.
  3. Institutions can use their own definitions for the purpose of classifying which technicians are to be directly allocated. However, it is good practice to ensure that the chosen definition minimises complexity and burden in implementation. The same definition should be used across all relevant departments and all projects.
  4. Only technicians in academic departments need be directly allocated, not those in central support departments such as occupational health, estates, etc.
  5. Several institutions are carrying out surveys to establish the number, type, and activities, of ‘technicians’ in order to inform their TRAC allocation and charges. An example of this, provided by a pilot institution, is given in document link Annex 17. This provides an example of emerging good practice, but is more than the minimum required under TRAC.
  6. A simpler method of establishing the technicians’ costs which are to be directly allocated is as follows:

    take the total costs of technicians allocated to Research (excluding DI costs) for non-laboratory departments, and the equivalent figure for laboratory departments.   

    divide each by the relevant Research FTEs (Research time of academics, research staff and PGRs included at the estates weightings of 0.5 and 0.8) to arrive at a cost per FTE.

    resulting in a laboratory cost per FTE which would normally be higher than that of the non-laboratory cost.

    The difference in the cost per FTE would then be multiplied by the Research FTEs in laboratory departments: 

    providing a notional cost of the ‘extra’ technicians in laboratory departments from those in non-laboratory departments. It is this figure that would then be excluded from estates charges and directly allocated, at least from 1 August 2007. It is then good practice (but not a minimum requirement) to identify the types of technicians that fall into this category of ‘laboratory technicians’.

Directly allocating laboratory technicians’ costs to projects

  1. When directly allocating laboratory technicians’ costs to projects, again a number of methods could be used:
    • identification of the respective levels of input required for equipment-intensive (or otherwise defined) projects, compared with other projects, and allocating technicians’ costs in a way that reflects this differential level of use. This could be through:
      • the use of standard £ costs chargeable to each project of a defined type; or
      • identifying a technician cost per technician hour (as described in the laboratory technicians’ example shown in document link Annex 17) and charging different numbers of technicians’ hours to each type of project;
    • a simpler method, where a standard charge expressed as a £ per academic/research staff FTE would be applied. This would have ‘fallen out’ of the simpler method described above as ‘the difference in the cost per FTE’.
  2. Irrespective of the methods used, institutions should ensure that:
    • they can verify the time that is being charged as directly incurred – either technicians (and other staff) are wholly dedicated to a project, or they complete project-level timesheets that are used to charge their time. These should be at least quarterly and it is good practice for them to be countersigned by an appropriate manager;
    • their methods are not so complex that they are in danger of under-recovering their costs;
    • there is no double-charging of technicians in the two categories of directly incurred costs and directly allocated costs;
    • as well as attributing laboratory technicians’ costs of Research to externally funded Research projects, they are also attributed to institution-/own-funded research and PGR activity. If laboratory technicians, for example, are being charged to projects on a £/FTE basis, then the FTEs used to calculate that rate would normally have taken PGR students into account. In that case laboratory technicians’ costs would be allocated to PGR student activity through application of the charge-out rate onto the PGR FTE.

Chapter G.2 Major research facilities

  1. The cost of equipment, including major research facilities, should be directly allocated to research projects. This means that it should not appear in the indirect cost rate. Equipment costs are to be included in the estates costs total, but no later than 1 August 2007 major research facilities should be directly allocated to research projects separately from the estates charge.
  2. It is good practice for other equipment to be directly allocated separately from estates as well, but that is not a minimum requirement. Materiality is an important consideration.
  3. All reference to a research facility in this chapter could also refer to equipment.   A research facility can be a single piece of equipment, or a group of equipment.
  4. Major research facilities include specialist animal facilities, greenhouses, and specialist IT research facilities.
  5. The charge-out rate for a research facility should be established by the following calculation:

    an annual fEC (a)

    total units of use for a year (b);

    a charge-out rate per unit of use: (a) divided by (b).

  6. The charge-out rate should then be applied to projects based on an estimate of the units used by each of those projects.
  7. The calculation of the rate, and the data collected for this purpose, should avoid undue complexity or spurious accuracy. It is not necessary to know either the historical cost or the sponsor of a piece of equipment when charging it directly onto projects. The avoidance of double-charging is covered further on in this chapter.

Annual fEC (a)

  1. The annual fEC should include an estimate of the following costs, where applicable:
    • depreciation (based on an estimate of its replacement cost, written off over the likely useful life of the equipment). This would take into account exceptional procurement costs, installation costs, buildings modification, set-up and testing;
    • technicians;
    • consumables and spares;
    • additional insurance;
    • estates.
  2. The operating costs (consumables, spares etc.) can be based on the actual costs of running that facility or a forecast level of costs.
  3. The costs of technicians and consumables should only be included where they are not being included as a directly incurred cost on any other project, and are excluded from the laboratory technician charge-out rate.
  4. Estates costs need not be included for all facilities – only where material.
  5. Indirect costs should not be included.
  6. The annual fEC (a) should include a depreciated replacement cost for the equipment (a broad estimate would suffice if detailed records are not available) written off over the likely useful life of the equipment. This replacement cost is unlikely to be the same as the historic cost.
  7. This replacement cost should be included irrespective of who funded its original purchase, when, and at what price.

Likely use of the facility (b)

  1. The likely use of the equipment (b) should be estimated. This should take into account its use for all activities (including Teaching) by all projects (including institution-/own-funded work and supervision of PGR students) and by all academics and all departments. This utilisation would commonly be expressed in terms of units of time (e.g. days or hours of use per year).
  2. Utilisation should be calculated on the assumption of at least a ‘reasonably efficient’ basis (in the context of use in the HE sector). If institutions plan higher utilisation than this, then those higher estimates of time should be included. The calculation of utilisation should therefore take into account the likely use (days or hours) of each facility for Teaching, Research (including all of institution-/own-funded, PGR supervision, external projects), and Other activities; but should also include additional days or hours if this likely use is significantly less than a level normally experienced in the sector for this type of facility.
  3. ‘Reasonably efficient utilisation’ which is normal for the sector could be established having considered:
    • utilisation that provides a market charge-out rate for this type of kit;
    • a concept of ‘well-managed equipment’; or
    • the target utilisation for the equipment (as long as it was not too light).

Calculation of the charge-out rate

  1. The annual fEC (a) divided by the units of use (b) provides the charge-out rate for that item of equipment. If equipment has been grouped in this calculation, but each item of equipment can be used separately on projects, then the group charge out rate should be divided by the number of items of equipment to give a rate per item of equipment. (Weightings could be used in this but not if these make the calculation unduly complex.)
  2. Each project’s use of each item of equipment should then be estimated, e.g. in terms of days or hours of use. Again, undue complexity should be avoided:  standards can be developed and applied. The relevant charge-out rate for the items of equipment used should then be applied to that time. This then provides a directly allocated cost for inclusion in the fEC of each project (and into the costs of Teaching, institution-/own-funded Research and PGR supervision when costed).
  3. The charge-out rates should be indexed, along with all other costs, over the life of the project. Rates calculated on 1 February each year should be indexed for two years’ price rises, before they are applied to a research project application.

Animal houses

  1. Animal houses should be considered a major facility:
    • the purchase of animals should be a DI cost (and if the number actually purchased is less than or more than originally estimated, the actual DI costs will change);
    • surgical procedures or other costs that are purchased from external sources specifically for a project should be charged as DI;
    • other costs, in particular housing, maintenance and operating costs, should be DA costs, charged to projects using charge-out rates.
  2. The DA costs should include:
    • estates costs of the defined space housing the facility;
    • facility manager, laboratory technicians, other administrative staff, veterinary services including surgical procedures when not externally purchased;
    • bedding and feed;
    • other operating, maintenance and support costs.

    These costs should not be included in the estates or indirect cost rates, or charged as a DI cost.
  3. A number of charge-out rates should be calculated and applied to projects – these would vary depending upon the type of:
    • animal;
    • condition;
    • care/maintenance provided.

Chapter G.3 Avoiding double-charging

  1. Double-charging should be avoided, and the costs included in facility charge-out rates should be excluded from estates costs or any other cost total in a project’s fEC.  
  2. For directly allocated costs, it is often very difficult to identify the actual costs being incurred that are forming part of the charge-out rates (e.g. depreciation costs on a particular piece of equipment, or a technician who is part of a pool of technicians). This is not a TRAC requirement.
  3. TRAC uses a simple method of resolving this, and of avoiding double-charging for directly allocated costs. This is done by deducting the costs used to calculate the charge-out rates from the estates cost figure used in the calculation of the estates charges:
    • the actual costs held in the accounting records which relate to items that are being directly allocated to research projects (such as major facilities and laboratory technicians), should be included as part of the TRAC estates cost total for Research.

      This would include all pool technicians’ salaries, all equipment depreciation or write-offs being recorded in the accounting records, maintenance costs, and so on.

      It would be unlikely to include all the costs included in the charge-out rate calculation. Depreciation in the charge-out rate, for example, being on a replacement cost basis and covering all relevant assets, is likely to be higher than the depreciation in the TRAC estates costs. The latter might be on a historical cost basis and would exclude any costs or assets that have been written-off.

    • the total annual fEC that has been used to calculate the DA charges for these items should then be deducted from the estates cost total for Research, before the estates charges for Research are calculated.
  4. This deduction can take into account the likely use of the equipment, not any higher ‘efficient use’. The costs deducted from the Research cost total would therefore be calculated as:

    the calculated charge-out rates (e.g. £/day)

    multiplied by

    the likely use by all Research activity – including institution-/own-funded activity and PGR supervision – that had been established during the calculation of the charge-out rate

    giving

    the costs to be deducted from the annual estates total before the estates charges are calculated.

  5. The avoidance of double-charging is covered in more detail in document link Annex 18.