Post on 03-Jan-2016
description
transcript
TRAC – the Transparent Approach to Costing
Finance Services
TRAC basics
• TRAC is a government initiated “activity based costing” methodology to cost teaching, research and other income-generating university activities
• This requires the answer to two big questions:– How do academics spend their time?
– How do we attribute overheads to activities?
• TRAC is based on economic cost, not accounting cost
• TRAC data is considered to be important information in relation to financial sustainability by the government
TRAC perceptions
HE FUNDERS
TRAC provides accountability for public money, assurance around
regularity of expenditure, a tool for informing teaching funding, and a consistent approach for costing
research projects and benchmarking costs between
institutions
PROFESSOR PERFECT
TRAC lacks credibility, is
intrusive, and is an unnecessary
burden
TRAC process
Cost of Teaching
Cost of Research
Cost of Other Activities
TAS
Students
Staff Space
Total Costs
Direct Costs
Staffing
IndirectCostsSo
urce
: Fin
anci
al S
tate
men
ts+
TRA
C ec
onom
ic c
ost a
djus
tmen
ts
TAS
Staff
SpaceStudents
TRAC Outputs
Cost of Teaching
Cost of Research
Cost of Other Activities
TAS
Students
Space
Full Economic Cost Rates for Research Grants
(=funding)
Subject – FACTS Average Cost of
TeachingSurplus/ (Deficit)
Surplus/ (Deficit)
Surplus/ (Deficit)
Teaching income
Research income
Other income
TRAC outcomes (2013/14)
Conclusion > high margin activity funds low margin activity
ActivityPublicly funded
teaching
Non-Publicly funded
teaching
Research Other Total
£000 £000 £000 £000 £000
Income (from financial statements) 127,445 45,443 98,720 33,739 305,347
Costs (from financial statements) 115,722 23,718 143,884 23,585 306,909
TRAC/economic cost adjustments 6,974 1,272 7,369 2,425 18,040
Total costs (TRAC full economic costs) 122,696 24,990 151,254 26,009 324,949
Surplus/(deficit) 4,749 20,453 (52,534) 7,730 (19,602)
% cost recovery (income / full economic cost) 103.9% 181.8% 65.3% 129.7% 94.0%
Peer group cost recovery 98.0% 147.4% 81.4% 117.9% 96.3%
Sector cost recovery 100.0% 134.9% 76.4% 110.8% 96.4%
TRAC key facts
• Exeter and the sector are in economic deficit
• Research funding doesn’t cover it costs
• Teaching international students (NPFT) more than covers its costs
• Research needs to be balanced with teaching to maintain financial sustainability
Let’s look at Research…
If Exeter’s cost recovery on our current research activity was at 81.4%, the level of our RG peers, rather than the 65.3% we achieve, we’d have extra income of £24m per year!
ie (81.4% - 65.3%) x £151.3m = £24.3m
ActivityGrants UKRC
Grants EU
Grants Charities
Grants Govt
Grants Other
Grants Total
Own funded
PGR QRTotal
Research
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Income (from financial statements) 25,488 13,544 5,406 12,907 5,493 62,837 3,238 13,444 19,200 98,720
Costs (from financial statements) 31,245 18,428 11,484 15,826 7,328 84,311 30,024 29,549 143,884
TRAC/economic cost adjustments 1,426 815 503 704 327 3,776 1,512 2,081 7,369
Total costs (TRAC full economic costs) 32,671 19,244 11,987 16,530 7,655 88,087 31,537 31,630 151,254
Surplus/(deficit) (7,183) (5,700) (6,581) (3,623) (2,162) (25,249) (28,298) (18,186) (52,534)
% cost recovery 78.0% 70.4% 45.1% 78.1% 71.8% 71.3% 10.3% 42.5% 65.3%
Peer group cost recovery 75.2% 72.1% 65.4% 80.9% 73.1% 74.1% 17.2% 59.8% 81.4%
Research key facts
• We spend more of our own money on PGR students than our peers
• QR income is low in relation to current research activity levels
• We report high levels of own-funded research activity
TRAC key messages• TRAC is important to funders and government
• TRAC data raises questions about the sustainability of research
• Exeter needs to balance poorly funded research activity with ..high margin activity to pay for it
• Exeter spends more of its own money on own-funded research ..and PGR supervision – this has to be paid for by earning high ..margin income streams
• Most HEIs who have concerns about the quality of their TRAC ..data feel that TAS is the main issue; workload planning could ..help resolve this
Want to know more?
• Julia Hastings is the University’s Strategic Costing Accountant j.hastings@exeter.ac.uk
• The British Universities Finance Directors group (BUFDG) have published a handy guide to TRAC