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