TRAC is an 'activity-based costing' (ABC) system tailored to the complex activities and culture of the higher education institutions (HEIs) in UK. It allows all the costs of the institution to be analysed and allocated to its primary activities such as Teaching, Research, and Others using appropriate cost drivers like staff FTE, time allocation schedule, space usages, etc. The process shows in the end how much each activity costs to the university and whether sufficient income is derived to cover the activity.

All the HEIs in UK are required by the government to implement TRAC. The government uses the high-level information derived from TRAC to inform its funding decisions.

All the public funders of higher education are under pressure to demonstrate accountability and value for money. The funding councils, research councils, the Training and Development agency for Schools, and Department of Health all use TRAC to inform their policy and funding requirements. It helps them to make the case to the government for the funding they manage, and more generally the existence of a consistent national costing system gives them reassurance about the good management of funds in higher education which is essential to their role in the continuance of such funding.

The university in particular and the sector in general has enjoyed the substantial benefits of TRAC through additional money received from and earmarked by the government for Research.

TRAC has developed four applications namely:

Annual TRAC

Annual TRAC is the process which leads to the annual reporting of the University to the funding councils of the income and cost of Teaching (split into publicly-funded and non-publicly-funded); Research (split into the main research sponsor types of institution/own sponsored research, PGR student activity and external research sponsors); and Other core institutional activity. The University reports in January each year, based on the accounts for the previous year (so in January 2010, it reports income and costs based on 2008-09 accounts data).

Income and expenditure are lifted from the audited accounts, and two cost adjustments are calculated to create "full economic costs" for the university. Income and expenditure are then attributed to activities (including an interim Support category), and to academic departments. Whilst costs are attributed directly where possible (e.g. the costs of research administration to Support for Research), most costs are grouped into cost pools and then attributed using cost drivers. The main cost drivers are staff numbers and academic staff time (obtained through time recording systems such as diaries or retrospective time allocation schedules), estates square metres and use, student numbers, and estimates from heads of schools. It is very important that these cost drivers are appropriate and provide robust measures of use.

While the Annual TRAC is required for public accountability, it also provides management information for institutional use. TRAC income and cost can be built up at school level, and the surplus/deficit by activity and by school is clearly relevant to managing sustainability.

Annual TRAC also calculates the charge-out rates for Research – the indirect cost rate, the estates charges and rates for other directly allocated costs such as research facilities and technicians. These rates are used in full economic costing of research and other projects, and so provide justification for public funding for research and a basis to inform pricing of non-publicly-funded projects (research, consultancy and other activity).

TRAC fEC

From 2005, as a result of the Government's reform of the dual support system for funding university research, all institutions applying for research council grants calculate TRAC full economic costs (fEC) for each research project.

When preparing research grant proposals, costs are broken down to three fund headings:

Directly Incurred (DI): this covers expenditure directly incurred for the project and includes:

  • Staff salaries (e.g. Research Assistants, project-specific technicians)
  • Equipment (including purchase, installation and set-up)
  • Travel and subsistence
  • Consumables
  • Other costs

Directly Allocated (DA): costs of the services used by the project, where the services are shared by other activities and projects. Costs are based on estimates or standards:

  • Investigators' salaries (calculated on the basis of percentage of time spent on research project)
  • Pooled technicians and other staff
  • Major and small research facilities
  • Shared resources (e.g. shared equipment, facilities and pooled technicians)

Indirect and Estates Costs Rates: support costs to projects each expressed as £ per full time equivalent (FTE) academic or research member of staff.. This includes:

  • Central admin support including Finance, DIT, Student support, etc.
  • Use of space including electricity, insurance, depreciation, etc.

For a more detailed breakdown of costs into the specific fund headings, refer to the TRAC guidance manual, Volume III – Full economic costs of projects. (http://www.jcpsg.ac.uk/guidance/part3_a0.htm)

The above-mentioned elements of costs comprise the total cost or fEC of carrying out the research project. These costs are profiled over the life of the project, and adjusted for pay increments and inflation.

Currently, the research councils pay only 80% of the fEC of a research project. This partly reflects the availability of other sources of funding to institutions (notably the block grant for research (QR) and public capital grants for research infrastructure).

Government departments are expected to pay 100% of the fEC for non-competitive research projects.

TRAC fEC

From 2005, as a result of the Government's reform of the dual support system for funding university research, all institutions applying for research council grants calculate TRAC full economic costs (fEC) for each research project.

When preparing research grant proposals, costs are broken down to three fund headings:

Directly Incurred (DI): this covers expenditure directly incurred for the project and includes:

  • Staff salaries (e.g. Research Assistants, project-specific technicians)
  • Equipment (including purchase, installation and set-up)
  • Travel and subsistence
  • Consumables
  • Other costs

Directly Allocated (DA): costs of the services used by the project, where the services are shared by other activities and projects. Costs are based on estimates or standards:

  • Investigators' salaries (calculated on the basis of percentage of time spent on research project)
  • Pooled technicians and other staff
  • Major and small research facilities
  • Shared resources (e.g. shared equipment, facilities and pooled technicians)

Indirect and Estates Costs Rates: support costs to projects each expressed as £ per full time equivalent (FTE) academic or research member of staff.. This includes:

  • Central admin support including Finance, DIT, Student support, etc.
  • Use of space including electricity, insurance, depreciation, etc.

For a more detailed breakdown of costs into the specific fund headings, refer to the TRAC guidance manual, Volume III – Full economic costs of projects. (http://www.jcpsg.ac.uk/guidance/part3_a0.htm)

The above-mentioned elements of costs comprise the total cost or fEC of carrying out the research project. These costs are profiled over the life of the project, and adjusted for pay increments and inflation.

Currently, the research councils pay only 80% of the fEC of a research project. This partly reflects the availability of other sources of funding to institutions (notably the block grant for research (QR) and public capital grants for research infrastructure).

Government departments are expected to pay 100% of the fEC for non-competitive research projects.

TRAC (T)

This is used to cost the main funding council funded teaching at subject level, with the main aim of informing the public funding of teaching.

  • The funding of teaching is not so directly tied to costs for several reasons, including the very wide diversity of teaching practices and costs across the sector. Nevertheless, the funding councils in England, Scotland and Northern Ireland operate teaching funding methods which are informed by costs, in the way they fund on a "price per student" basis, and allocate subjects to different price bands.
     
  • In England, HEFCE conducted a review of its teaching funding method in 2005-06, and decided, after consultation with the sector, to extend the use of TRAC to provide cost information to inform the funding of teaching.
     
  • TRAC(T) is mandatory in England and Northern Ireland and is implemented by nearly all institutions in Scotland.
TRAC EC-FP7

This is an optional costing application which can be used by Institutions with EC contracts if they judge it in their interest to do so.

  • TRAC EC-FP7 is a development of TRAC fEC. Some adjustments are made to TRAC fEC in order to satisfy the European Commission's requirements for a method to calculate personnel charge-out rates and "real indirect costs".
  • The additional requirements include the completion of project-based monthly timesheets by all members of staff (and students) working on the project, removal of some ineligible costs from the indirect cost rates, and replacement of any proxy costs (such as an indirect cost rate based on a prior year's expenditure) by actual costs incurred in that period.
  • There is a considerable administration burden in complying with these requirements. Unlike applications 1-3, TRAC EC-FP7 affects a smaller number of institutions, and is voluntary in that each institution can decide whether the extra TRAC work is justified by the additional income recovered as a result.

Sources:

  1. Policy overview of the financial management information needs of higher education, and the role of TRAC – A report prepared for the Financial Sustainability Strategy Group and the TRAC Development Group by JM Consulting July 2009
  2. TRAC EC-FP7 Guidance JM Consulting Ltd 10 November 2008
  3. Transparent Approach to Costing – An overview of TRAC by Joint Costing and Pricing Steering Group June 2005
Key Dates

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Contact

TRAC helpdesk - trachelpdesk@abdn.ac.uk

Background

TRAC was introduced as a result of the Government's Transparency Review in 1999. The first TRAC data showed a significant underfunding on publicly-funded research. It highlighted the problem of the sustainability of research activity and infrastructure in HE with Universities funding the deficit.

In response to the results of the TRAC review, the Government reaffirmed its commitment to support UK's research bases and to help HEIs attain long-term financial sustainability. Over £1 billion annually of additional funding was provided by the Government to this end. And from 2005, the Research Councils started funding research projects at 80% of the TRAC full economic cost which is significantly higher funding for the same work than the previous basis of 'direct costs + 46%'. The research block grant was also increased as part of the reform.

What is full economic cost?

Full economic cost (fEC) was a development of TRAC which allowed the total costs required to run a research project in a sustainable manner be established. Under the old methodology, sponsors fund a varying percentage of the direct and indirect costs of the project where many indirect costs are not considered in the calculation.

Under fEC, institutions are required to identify all direct and indirect costs incurred for each research project. These include costs for all staff working on the project (including PIs, technical and administrative staff), equipment (new items and charge-out rates for existing equipment), consumables, travel, estates costs (University space used during the project), central service department costs, utilities, depreciation, insurance, and net infrastructure adjustment.

What is 'sustainability'?

An institution is being managed on a sustainable basis if, taking one year with another, it is recovering its full economic costs across its activities as a whole, and is investing in its infrastructure (physical, human and intellectual) at a rate adequate to maintain its future productive capacity appropriate to the needs of its strategic plan and students, sponsors and other customers' requirements.

FAQs


What is TRAC?

TRAC is an activity-based costing (ABC) system designed to measure the cost of delivering research, teaching and other activities in a higher education institution in a way that is appropriate in its academic culture.

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What does TRAC do for us?

  • Additional funding for research

Both QR and fEC funding were increased to make research more sustainable.

  • Capital grants

TRAC evidence contributed to the case for reform of capital grants funding – leading to SRIF and Learning and Teaching Capital, and now the Capital Investment Framework.

  • Teaching funding

Funding councils in England, Scotland, and Northern Ireland have access to Subject-FACTS data which can help to ensure teaching funding is informed by real costs, and cost differentials.

  • Sustainability

TRAC helps institutional management to plan for stronger and more successful institutions.

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What does TRAC do for funders?

  • Assurance

TRAC gives funders the assurance that institutions know their costs and can provide value for public investment

  • Accountability

TRAC helps funders to make the case for continued public funding.

  • Information for policy development

TRAC informs various policy initiatives and investigations including:

  • The reform of the dual support research funding
  • The use made of QR
  • The benchmark prices for teaching contracts with the Department of Health and Training and Development Agency for Schools
  • The costs of new types of provision (Widening participation, off-campus learning, employer engagement, partnership working)

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What is fEC?

Full Economic Costing (fEC) is a methodology for calculating the full cost to an Institution of undertaking a project/activity in a sustainable manner. All direct and indirect expenses are identified which include costs for all staff working on the project (including PIs, technical and administrative staff), equipment (new items or charge-out rates for research facilities), consumables, travel, estates costs (University space used during project), central service department costs, utilities, depreciation, insurance and net Infrastructure adjustment.

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Why is fEC important to us?

fEC allows us to quantify the total costs of our activities which is what the national funding councils want for accountability purposes and at the same time this enables us to received more money from them. This also allows improved cost recovery from other funders, thereby putting us in a stronger position to invest is necessary infrastructure and therefore attain long term sustainability.

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Will all research projects be funded at fEC?

The proportion of fEC recovered depends on the sponsoring body:

  • Research Councils fund 80% of the fEC
  • Government departments should normally pay 100% of the fEC for non-competitive research projects
  • Commercial contracts are expected to pay 100% of fEC.
  • Charities and EU sponsors are likely to fund a proportion of the fEC, or alternatively may exclude some of the eligible costs from research proposals

Additional QR (RAE-related) grants are awarded by the SFC to subsidise the "funding gap" between the funds received and the actual cost of the research.

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How can the University improve its long-term sustainability of its activities?

The TRAC guidelines suggest that Institutions need to do five things to achieve long-term sustainability:

  1. Establish and recognise the full economic costs of all activities
  2. Manage its activities strategically
  3. Secure better prices for research from sponsors
  4. Improve project management and cost recovery
  5. Invest in the University’s infrastructure

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Why is it necessary to fill in Time Allocation Schedules?

The University has current information on individual staff salaries and the total annual salary costs. However, a key part of calculating individual project/activity costs on a fEC basis is obtaining specific data on how staff allocate their time between teaching, research and other activities. This information can then be used in conjunction with the salary details to calculate the actual allocation to each project/activity. In addition, the relationship between core and support drives the calculation of the institution's indirect cost rate which we charge to forecast the full cost of research projects.

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Will all staff have to fill in time allocation schedules?

No, only academic members of staff are required to fill in the time allocation schedules mainly because the academic staff time makes up the largest single element of costs in the accounts. To determine where this significant resource is being directed, a process of robust allocation of academic effort is essential.

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How often will I be asked to provide this information?

Guidelines for TRAC require time allocation data to be collected at least every 3 years.

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Glossary
Abbreviation Description

£/FTE

Cost per Full Time Equivalent (used as the basis for both the estates and indirect costs charges for each research project)

AHRB

Arts & Humanities Research Board
http://www.ahrb.ac.uk/

BUFDG

British Universities Finance Directors Group
http://www.bufdg.ac.uk/

Co-I

Co-Investigator

EPSRC

Engineering & Physical Sciences Research Council
http://www.epsrc.ac.uk/default.htm

FSSG

Financial Sustainability Strategy Group

FEC

Full Economic Cost

FTEs

Full Time Equivalent number of staff or students

HEFCE

Higher Education Funding Council for England
http://www.hefce.ac.uk/

HEI

Higher Education Institution

JCPSG

Joint Costing and Pricing Steering Group
http://www.jcpsg.ac.uk/

J M Consulting

A consultancy group commissioned by OST/HEFCE to extend TRAC to the costing of research projects on a full economic costing basis

OST

Office of Science and Technology
http://www.ost.gov.uk/index_v4.htm

PGRs

Post-Graduate Research Students

PI

Principle Investigator

QR

Quality Research funding from SHEFC

RA

Research Assistant

RAE

Research Assessment Exercise
http://www.rae.ac.uk/default.htm

RCUK

Research Councils UK
http://www.rcuk.ac.uk/

Joint Research Councils and AHRB Dual Support reform webpage
http://www.pparc.ac.uk/jes/dualsupport.asp

This page contains links to the requirements, terms and conditions for submitting grant proposals on a fEC basis from 1st September 2005, published jointly by the Research Councils and the Arts & Humanities Board (AHRB).

ReCAP

Research, Costing and Pricing committee at Aberdeen University

SFC

Scottish Funding Council
http://www.sfc.ac.uk/

SHEFC

Scottish Higher Education Funding Council (now SFC or Scottish Funding Council)
http://www.shefc.ac.uk/

SRIF

Science Research Infrastructure Fund

TAS

Time Allocation Schedule

TR

Transparency Review

TRAC

Transparent Approach to Costing

TRAC Guidance (7/06)

Revisions to TRAC Guidance

http://www.jcpsg.ac.uk/guidance/about.htm


http://www.jcpsg.ac.uk/guidance/revisions/