Transparent Approach to Costing (TRAC)

Transparent Approach to Costing (TRAC)

TRAC - Transparent Approach to Costing

TRAC is an activity-based costing system which meets the needs of higher education institutions (HEIs) and the main public funders of higher education. TRAC is based on some important principles that provide flexibility to accommodate the diverse range of institutions in the sector.  It was introduced across the UK higher education sector in 1999 as a government requirement and to allow a better understanding of costs incurred within individual institutions.

TRAC takes institutional expenditure information from the consolidated financial statements, adds a ‘sustainability adjustment’ to represent the full ‘sustainable’ cost of delivery, and applies cost drivers (such as academic staff time allocation and space usage) to allocate these costs to academic departments and to specific activities. Income is analysed through a separate TRAC process, so that the gap between the full cost of activities and the income attributed can be determined for each main category of institutional activity.

Annual TRAC Return

The Annual TRAC return is normally submitted to the Funding Councils by 31 January each year. This Annual TRAC return reports the cost of teaching, research and other activities together with various sub-analyses of the costs.  In addition, income is allocated to these categories in order to arrive at a surplus/deficit figure for each area of activity.

The return must be reviewed at an appropriate level (TRAC Steering Group) prior to being approved for submission by the Audit and Risk Committee. The TRAC return and University processes in place to complete the return may also be subject to an external audit.

The information provided by institutions in the annual TRAC return is used by the funding councils to understand the financial position of HEIs across the sector, and in particular the financial sustainability of teaching, research and other activities. It is also used by research councils to gain insight into the full economic cost of research, especially the impact that indirect and estates costs have on the overall cost of funded research projects.

The information is also used by institutions to establish the full economic cost of research projects, which is required when submitting applications for funding to the research councils and some other public funding agencies.

Full Economic Costing (fEC) & Sustainability

Full economic costing (fEC) is the element of the TRAC methodology that encompasses the forecasting of and accounting for the full economic cost of individual research projects on a reliable, comprehensive and consistent basis. It is used by institutions to identify the full economic cost of research projects when preparing funding applications to the research councils and to other public funding agencies. It is then used by funders to determine the level of funding awarded to successful projects.

TRAC guidance requires that the full economic cost includes an adjustment to recognise a measure of the cash that is required to sustain our future plans for investment. This uplift is the Margin for Sustainability and Investment (MSI) and is based on the average of our actual financial performance over the previous three years and our forecast performance over the next three years.

The full economic cost of a research project is made up of directly incurred costs, directly allocated costs and indirect costs. Directly incurred costs relate to staff, goods or services that are hired or purchased specifically for that project. Directly allocated costs relate to staff, facilities or services that are shared across a number of activities or projects, for example shared lab technicians, major research facilities, and estates costs. Indirect costs are costs that are not related directly to any one project or activity but are a necessary part of the costs of undertaking an activity, i.e. overheads. These include the costs of professional services and support staff in academic departments.


The TRAC for Teaching return (TRAC(T)) should be submitted in late February each year and provides a cost by academic cost centre, as defined by the Higher Education Statistics Agency. The cost is derived from the Annual TRAC data for Teaching and is used to inform Funding Councils’ funding of teaching. The information provided by institutions in the TRAC (T) return is used by the funding councils to understand the cost of teaching provision. It is also used by the funding councils to obtain information on the relative costs of different subjects when reviewing price group weightings within the teaching funding mechanism.

Other TRAC Resources

About TRAC

TRAC Guide for Senior Managers

TRAC Guide