trac – the transparent approach to costing
DESCRIPTION
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: - PowerPoint PPT PresentationTRANSCRIPT
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TRAC – the Transparent Approach to Costing
Finance Services
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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
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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
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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
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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
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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%
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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
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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%
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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
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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
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Want to know more?
• Julia Hastings is the University’s Strategic Costing Accountant [email protected]
• The British Universities Finance Directors group (BUFDG) have published a handy guide to TRAC