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TRAC – the Transparent Approach to Costing

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:

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TRAC – the Transparent Approach to Costing

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  1. TRAC – the Transparent Approach to Costing Finance Services

  2. TRAC basics • TRAC is agovernment 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

  3. TRAC perceptions 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 TRAC lacks credibility, is intrusive, and is an unnecessary burden HEFUNDERS PROFESSOR PERFECT

  4. TRAC process Source: Financial Statements + TRAC economic cost adjustments Total Costs Direct Costs Staffing Indirect Costs Cost of Teaching TAS Cost of Research TAS Students Cost of Other Activities Staff Staff Space Students Space

  5. TRAC Outputs Teaching income Cost of Teaching Subject – FACTS Average Cost of Teaching Surplus/ (Deficit) TAS Cost of Research Research income Surplus/ (Deficit) Full Economic Cost Rates for Research Grants (=funding) Students Other income Cost of Other Activities Surplus/ (Deficit) Space

  6. TRAC outcomes (2012/13) Conclusion > high margin activity funds low margin activity

  7. 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

  8. 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 70.3% we achieve, we’d have extra income of £14.5m per year! ie (81.4% - 70.3%) x £130.5m = £14.5m

  9. 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

  10. 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

  11. 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

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