| Welcome | Update on Activities | |
| Appointment of National Co-ordinator | Launch of Website | |
| New developments in Costing and Pricing | Training |
Welcome to the first JCPSG Newsletter, the official bulletin of the Joint Costing and Pricing Steering Group (JCPSG). The newsletter will be published quarterly and distributed to institutions for onward circulation to the relevant staff. It will include information on the following: current work being undertaken by JCPSG; new developments in costing and pricing; information on training materials and sources of further guidance; feedback on progress being made within the sector and any other items of interest. Contributions and comments are always welcome and should be forwarded to the editor, whose contact details can be found on the back page.
The Joint Costing and Pricing Steering Group was formed in July 1997. Its
primary objective is to assist and encourage higher education institutions
to incorporate formal costing methods into their financial practice. This
will foster the integration of financial and academic considerations; ensuring
that decision making is better informed and also that pricing decisions are
taken with the benefit of robust full cost data. The project builds upon earlier
work, which culminated in the publication of "Management Information for Decision
Making: Costing Guidelines for Higher Education Institutions", issued in July
1997 by the joint funding councils.
The JCPSG is a representative group: it brings together members from universities
and colleges, from the funding councils, and from CVCP, SCOP, COSHEP and HHEW.
It has already built up a considerable understanding, when demands are increasing
but resources are not keeping pace, of how a broader approach to financial
and academic management could benefit the sector, and of the issues faced
by institutions wishing to embrace such an approach. JCPSG has been provided
with funds by HEFCE, SHEFC, HEFCW and DENI to develop and disseminate guidance
on good practice in costing and pricing, and to provide training materials
which will be a useful resource to universities and colleges. The funds have
also enabled a National Co-ordinator's Office to be set up to support and
advise the sector in implementing the changes needed over the next few years.
It is surprising, but true, that few universities and colleges are able to provide robust data for costing all their activities. This is not a criticism of their management ability but in many ways reflects the sector's historical funding position. Most financial approaches have focused on the allocation of income to academic departments and support services, rather than on the detail of how resources feed through into providing higher education deliverables. Therefore what is required is a change of paradigm, from approaches based on income allocation to those based on the costing of outputs. This is not simply a technical matter for the finance office: it also requires the involvement of academic managers, and support and understanding from institutional heads and governing bodies if it is to be successful. To show real benefits there needs to be a change of culture around the decision making process and the integration of its various components.
For the institution itself the prize is more robust management information.
This will show itself in better informed choices between options; enhanced
appraisal of value for money; the possibility of benchmarking of activities;
balancing academic outcomes with a knowledge of their full cost; and informed
pricing of activities on the basis of contribution rather than purely on income
maximisation. The benefits for higher education as a whole are that it will
be easier for universities and colleges to counter the often-heard challenge
that their management is deficient; it will provide a firm basis for the sector
to negotiate higher prices with its external sponsors; and it will enable
the sector to claim that it can account in costing terms for the use of its
public funds. Once this criticism is laid to rest we can then concentrate
on demonstrating the value to the UK of our activities in a much more direct
way.
I hope that the work of the JCPSG will receive the support of all universities
and colleges in carrying this agenda through over the next three years. We
will keep you informed of the work being carried out and of progress made
so far; in turn I hope you will let us know of the good work being undertaken
in your own institution. There is a lot of activity going on and much progress
has already been made. We must ensure that this information is shared, in
order to create the necessary momentum required to deliver maximum benefits
to the sector.
Sue Delve was appointed as the National Co-ordinator for Costing and Pricing, on three years' secondment from the University of Bristol, in November 1998. Her main tasks are to:
The JCPSG web-site is now accessible at
www.bris.ac.uk/JCPSG
As well as a copy of this and subsequent newsletters the web-site contains
information on the following:
The web-site will be updated regularly with details of new developments in costing and pricing, so be sure to add this address to your list of bookmarks.
In preparation for the last Comprehensive Spending Review both the Office
of Science and Technology (OST) and the Department for Education and Employment
(DEE) had difficulty in convincing the Treasury that the higher education
sector could account properly for the public funds it receives for research.
Not only were the Treasury sceptical about arguments that there was a research
funding gap, but the fact that the sector could not quantify this gap to any
degree of precision also cast doubts over the management and cost effectiveness
of public spending on university research, and probably by implication of
spending on teaching also. In the event, extra funds were provided for capital
projects (the Joint Infrastructure Fund) but not to support recurrent expenditure.
Bridging this credibility gap requires two actions: firstly, universities
and colleges are required to implement a uniform approach to costing as part
of their financial management processes; and secondly, a reporting arrangement
to capture the full cost of all higher education activities, particularly
research, needs to be put in place. Clearly, it would be helpful for these
to be available in time for the next CSR.
The development of a uniform approach to costing and its implementation in
universities an colleges, along with reporting arrangements to meet these
government requirements, has become known as the Transparency Review. Because
of its UK-wide remit, OST has been charged with this task and is working through
the Transparency Review Steering Group (TRSG), chaired by the Director General
of Research Councils, Dr. John Taylor. TRSG is required to report to the Science
and Engineering Base Co-ordinating Committee (SEBCC) by the end of June 1999
on an appropriate approach to institutional costing that will meet the needs
of government without placing an unduly onerous burden on the sector.
Although the Transparency Review is focused on research, the terms in which
it is expressed are no different from those set for other government departments.
A similar set of questions may arise for teaching and other activities, though
they are perhaps not so pressing. Obviously, it is not possible for an institution
to set up a robust methodology for costing research in isolation: it must
be holistic and take into account all activities if it is to work satisfactorily
and to produce auditable outcomes.
It would be highly desirable if the higher education sector itself could meet
the requirements of the Transparency Review, so avoiding the imposition of
an approach from outside. TRSG has agreed to work with JCPSG in determining
an appropriate uniform approach to the costing of all activities that will
meet these requirements. This task has been placed with JM Consulting Ltd.,
and a report will be delivered to JCPSG and TRSG for submission to SEBCC by
the end of June 1999.
The consultants have met with representatives of a large number of institutions
and are preparing their report for June. Alongside this activity, eight universities
have agreed to become pilot sites to develop the methodology and guidance
for implementation by the whole sector. This work will take place in the financial
year 1999-2000, and results will be made available as soon as possible. The
eight universities are: Birmingham, Bristol, Cardiff, University College London,
Portsmouth, Surrey, Strathclyde and Warwick. The sector will be kept informed
of pilot site progress through this newsletter and the JCPSG web-site.
The integrity of the dual support system for research funding may well depend
on the progress made in meeting the requirements of the Transparency Review.
Also, any proposal for additional funding for research in universities and
colleges is likely to depend on the establishment of appropriate systems for
costing and reporting in institutions.
The implementation of a uniform approach to costing all activities will not
simply be a technical issue for finance offices; it will also require a culture
change amongst academic managers. This is because an assessment of the use
of staff time will be needed to inform the cost of activities, although it
is not intended to require the use of timesheets. It is recognised that the
cost of implementing new systems should be minimised and that any additional
burden on the sector is not welcome. However, an important objective is to
raise confidence in the financial management and reporting of the sector,
through the implementation of appropriate systems. This will encourage the
Government to move away from focusing on financial inputs to the assessment
of higher education outputs. This is a prize worth working for, particularly
with regard to research.
The long-awaited details of the calculation of EC funding under Framework 5 are now available. The major change from previous programmes is the addition of a third method of calculating costs called 'Full Costs (Flat) Fixed Rate (FF)'. This method allows applicants to participate on a full cost basis without having to prove that they fully comply with Analytical Accounting Principles (AAP). Under the FF method, applicants may claim up to 80% of direct personnel costs as an overhead rate. However, as with the Full Cost (FC) method, the Commission will only contribute 50% of the total costs identified. The other minor change is to allow applicants to include co-ordination and IPR costs, both of which are subject to prior approval by the Commission.
The JCPSG initial training package entitled 'Costing and Pricing for Decision-Makers
in Higher Education' is complete and is currently being printed. The material
will be available as a paper copy and on floppy disk, as well as on JCPSG's
web-site. It is expected that the package will be distributed to each institution
in June.
The training material has been developed as a resource that institutions can
draw on to assist them in the implementation of their own costing and pricing
strategies. For institutions to derive the greatest benefit from this package,
it is envisaged that finance office staff will tailor these materials to take
account of local circumstances. The materials can then be delivered to academic
and non-academic managers within the institution.
It is envisaged that JCPSG will commission further training modules during the project to build upon the materials in the initial package. These modules will seek to satisfy any additional guidance requirements as they are identified, and to disseminate information on both emerging good practice and new developments in costing and pricing.
| Edited by Sue Delve, National Co-ordinator for Costing and Pricing, JCPSG, University of Bristol, Room. 3.11 Senate House, Bristol, BS8 1TH. 0117 928 9821 Sue.Delve@bristol.ac.uk |
to the top