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Notes for project managers
Newsletter 3
These notes are aimed at those who are project managing the implementation
of the Transparency Review requirements and the wider costing and pricing
strategy. They clarify some of the issues in the Guidance
Manual and include a checklist of items that institutions should
address when formulating their strategy for costing and pricing and applying
for funds from the funding body.
At the hypothetical University College of Tynebridge,
the Project Manager explains how they intend to implement the requirements
of the transparency Review when allocating academic staff time.
"Here at the University College of Tynebridge we are not going to wait to
learn from the experiences of the pilot sites. We are aware that we will need
to begin work on the transparency Review soon because, like all institutions,
the college will have to report in 2001 on 1999-2000 data. We have decided
to ask the heads of most of the academic departments to complete the time
allocation schedules on behalf of their staff. We have chosen some departments,
however, to help us start some in-year time allocation methods.
Those heads of departments that are completing time allocation for their
staff will gather information through an annual workload meeting with their
staff. The workload profiles of some members of staff will be used as a proxy
for others of a similar grade and with similar workloads.
Verification and validation requirements mean we will use a robust method
of collecting time data over a five-year cycle. In-year data will be collected
from our academic staff over this period. We intend to introduce in-year methods
during the calendar year (2000), as we consider this to be representative
of the academic year 1999-2000. We intend to apply this to 25% of our staff,
with the rest of the institution being covered by annual retrospective data
collection for that year.
For the departments starting in-year time allocation we have designed three
schedules, covering terms 2 and 3, and term 1 of 2000-01. (We know that two
will not meet the transparency Review requirements.) Heads of department will
not need to sign off these schedules. After discussions with our project team,
which includes academic representatives, and our Director of Personnel, we
do not plan to collect information on the total number of hours worked.
The total publicly funded research activity for our institution is actually
much less than the £0.5 million threshold identified in the Guidance
Manual. This means that, according to the costing standards, we are not actually
required to carry out verification and validation checks ( see
the discussion on dispensations ). We have decided, however, that we will
undertake the verification processes in order to improve the robustness of
the data and provide more useful information internally.
In the first year we will also carry out some reasonableness testing to show
that our data are fair and reasonable. We will do this by benchmarking outputs
against those from similar institutions, studying outlying results, and comparing
time data with that derived from different sources (such as from our workload
planning models).
We do not intend to repeat our methods of data collection year after year
unless we are aware that the figures previously provided have materially changed
and are no longer appropriate. We do intend, however, to improve our information
year on year to ensure that we are reporting robust data. Whatever time allocation
methods we use, we will want to carry out reasonableness checks every year.
After the first five-year cycle we may use another accepted method in order
to reduce academic involvement, namely, statistical sampling. Or we may consider
the 'big-bang' approach whereby we would ask all appropriate academics to
complete several in-year time allocation schedules over the same year. We
will want to learn more about best practice in the sector, based on experience
in the first five years, before deciding on this."
An institution can opt to use a range of methods within the organisation,
as long as they meet the transparency Review requirements for robustness.
Project managers should ensure that they are fully conversant with the Guidance
Manual and the costing standards.
As project managers within institutions tend to be responsible for the development
of a wider costing and pricing systems, they need to ensure that the work
of the transparency Review is part of a holistic approach and embedded in
the institution's own costing and pricing systems.
The JCPSG is planning to run workshops for project managers in the summer,
focusing on taking forward the implementation phase. Details will be posted
on the web-site.
Clarification of the Guidance Manual
>Reducing the burden for small institutions
Dispensations
The transparency Review guidelines recommend that all institutions should
have regard to the principle of materiality. Following this principle, institutions
will not be required to carry out verification and validation checks if their
total income for publicly funded research activity falls below £0.5
million. This dispensation will cover about 40 institutions.
The dispensation means that cost drivers are not subject to verification
and validation. Time is of course a key cost driver (of staff costs), and
the requirement to introduce a 'robust' time allocation method in five years
is relaxed. Similarly, there is relaxation of the requirement to verify other
cost drivers, such as those used for estates and learning resources costs.
High-level proxies such as student FTEs or student numbers can continue to
be used to allocate these costs, and there is no need to investigate and identify
other more 'robust' drivers (such as the space or library resources used by
each department and for each type of activity).
However, these verification processes do ensure that more robust data and
more useful management information are provided. For this reason, some institutions
that fall within the dispensation category have already decided to carry out
some verification and validation checks.
All institutions, irrespective of the size of their research income, are
required to carry out reasonableness checks on their data to ensure it is
fair and reasonable and a fair reflection of reality. A list of suggested
reasonableness checks is provided in the Guidance Manual, Section C4 page
23.
The dispensation also states that there is no need to calculate cost rates,
unless institutions wish to justify costs to sponsors under the transparency
Review of Research. However, it would be useful for institutions to calculate
cost rates because they can use the data to inform price setting for teaching
and other activities.
For further information, contact Lisa Blackshaw, National Co-ordinator for
Costing and Pricing, on 0161 247 1890.
Development of the Guidance Manual
The following two main areas of guidance still need to be developed:
- The treatment of clinical service costs within medical and dental schools.
A consultation paper has been distributed to medical and dental schools.
- Adjustments to the costs showing in the final accounts to reflect an institution's
full infrastructure costs and also to provide for a rate of return. A paper
on this subject is being submitted this month to the transparency Review
Steering Group, chaired by Dr John Taylor.
Definitions
The following clarifies some definitions in the guidance manual:
- Preparing Research papers and books for publication should be classified
as Research.
- Preparing non-research papers and books should be classified as scholarship
or Support for Teaching.
- Preparing materials for Teaching should be classified directly to Teaching.
- Time on external examining is classified as Teaching (not Support for
Teaching).
- Clinical trials may be classified to either Research or Other (the definition
in Section D3 is correct).
- Overseas/self-funded students on UK courses should be pulled out as Non
Publicly Funded Teaching if material (a high level apportionment would be
acceptable). However, you may find that considering materiality at a department
level is more relevant than at an institution level.
The following questions will guide institutions in formulating their strategy
for costing and pricing.
- Do senior management support the implementation plan and timetable?
The application for funds should include a detailed implementation plan
and timetable. Senior managers should be clear about the outputs/deliverables
from the proposed strategy and be fully committed to its successful implementation.
The plan should show clearly how the strategy will become fully embedded
in the management decision-making process and adopted within the institution
as part of its day-to-day operations.
- Has the institution secured the resources to implement the plan?
The institution should consider how the initiative will be resourced at
the set-up stage and as an on-going strategy. The project may require all
or some of the following:
- a dedicated accountant/part qualified accountant to manage the project
- guidance and availability of a senior member of the finance division
- a temporary member of staff to cover the work of somebody seconded
to the project
- releasing time for other members of the project team
- enhancements to computer hardware and the purchase of costing and
pricing software
- use of consultants and training costs.
The main question to ask is 'Will the resources employed produce the desired
outcomes?'
- Is there a plan to train all staff involved in the costing and pricing
of activities?
training will be integral to the success of the project. Institutions that
have already formulated their strategy and who are starting to implement
beyond the transparency Review requirements intend to give training a high
priority, using materials commissioned by the JCPSG and other internally
generated training packages.
The training of staff should be ongoing and will need to develop in line
with advances in institutional information systems. Any training programme
should be aimed at all staff with an interest in costing and pricing, that
is, the senior management team, the academic board, heads of schools and
central services, budget holders, and finance division staff.
- Are the implementation plan and timetable to be discussed and approved
by the governing body?
The proposed strategy will need to be approved by the institution's internal
committee structure. However, applications can be made to the funding council
in advance of governing body approval; funding will be conditional on that
approval being given at the next meeting of the governing body.
- Does the plan include a post-implementation review?
The institution should plan to review the work undertaken and inform the
governing body of the benefits gained.
- Does the plan include an examination of the processes and decisions
involved in pricing activities?
Institutions should review pricing policy with a view to introducing a standardised
pricing framework. They should revise formal internal planning and approval
processes and structures to include a review by, and recommendations from,
the finance division.
The Financial Memorandum between the funding councils and institutions
states that institutions should ensure that the full cost of all research,
consultancies and other activities commissioned or sponsored by outside
bodies is assessed. A costing model can be used as a basis for assessing
prices for activities.
- Do the strategy and implementation plan follow the guidelines in the
JCPSG publications?
The proposed strategy should be based on the principles set out in the documents
distributed by the funding bodies, the JCPSG, and the CVCP. These include
'Management information for decision-making: costing guidelines for higher
education institutions', published by the funding councils in July 1997;
and 'Costing and Pricing of Research and Other Project', published by the
CVCP in March 1998.
- How does the costing and pricing strategy fit with the overall institutional
strategy?
Any costing and pricing strategy should fit with the institution's strategy
and mission. To enable a full understanding of resource usage, it must also
cover all the institution's activities, at home or overseas, academic and
non-academic (such as residences and catering). The strategy should also
fulfil the requirements of all stakeholders, namely, the Government, other
sponsors, and of course the university or college itself.
- How will the institution promote the integration of academic, financial
and other operational decision-making?
The integration of academic and financial planning is a key element for
effective decision-making in HEIs. Institutions will need to embed their
costing and pricing methods within the academic and non-academic processes
of the institution.
- Is the work for the transparency Review part of a holistic approach
to costing and pricing?
To gain the maximum benefits, institutions may find it appropriate to satisfy
the requirements of the transparency Review as part of a holistic approach
to costing and pricing, and to embed this into whatever systems and methods
it adopts. The outcome of the transparency Review should strengthen the
drive towards proper costing and pricing.
- What benefits will the institution derive from its strategy?
Each institution will have its own benefits, however, for every institution
the strategy should provide:
- a more strategic approach to financial planning
- enhanced management information, decision making, and transparent
funding
- greater confidence using a more credible base, in negotiating prices
with commercial clients
- a more consistent approach throughout the institution to evaluating
existing and new activities
- a greater understanding of the financial implications of academic
and other decisions
- greater awareness of the relative contributions of the operating units
and an increase in net contribution
- increased control of the institution's costs.
- How is the project going to be managed?
The project will need clear commitment from the senior management team,
with leadership from the top. A multi-disciplinary steering group can provide
direction and help establish consistent and approved principles and a framework
against which the project will operate. Other staff members with specialist
knowledge may be co-opted to the group as required.
The project will need a manager to oversee development through every stage.
A project team should also be identified, whose members will be responsible
for the day-to-day management of the project. The project should be centrally
controlled and co-ordinated in both the development and post-development
stages to ensure a consistent approach throughout the institution.
- Will the exercise be piloted in a particular faculty or department?
It may be appropriate to apply the resultant model to a pilot faculty or
group of selected departments to test principles and approaches.
- When will the project start?
Developmental work must begin as soon as the institution has received the
first tranche of funding from the funding council.
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