The New RASCAL Model

1. The New RASCAL Model Resource Allocation System and Cost Apportionment at Loughborough (RASCAL) 25 April 2012

2. Why RASCAL • The majority of the University’s income comes from the core activities of teaching and research, including short courses and consultancy. These are carried out in the 10 Schools of the University at departmental level. At a University level there is also income from the Residential and Catering operations. The surpluses from these operations add to the funding available to the University. • Support Services such as Facilities Management, IT Services, Student Services, Human Resources, etc are all essential costs of the University which enable it to function but are not self-financing. These departments are given an allocated budget from the University with which to deliver the required level of service to the University. • The difference between the total income for the University and the total expenditure of the University is the surplus (or deficit). As the required surplus is set at 3% of turnover it can be regarded as another “cost” to the University. • RASCAL attempts to allocate income to the departments generating the income and charges them with the directly attributable costs of the department plus a fair share of the total costs of the University, including the required 3% surplus. • The net result of income minus directly attributable costs minus apportioned costs is the surplus or deficit of the department/School. The way RASCAL is constructed means that as long as each department/School meets its budget, whether surplus or deficit, the University will balance its budget and deliver the required surplus

3. Allocation of Income

4. The need for change A New Funding Regime • Under the current funding regime HEFCE categorise subjects into 4 bands and funds students according to the band they are in. • The intention was to try to allocate funding according to the cost of delivering the subject. • The bands, going from A to D, were weighted 4.0/1.7/1.3/1.0. • Under the new fee regime only bands A and B are going to be funded. Band B will be getting £1,483 from HEFCE. • As the University is going to charge £9,000 fees, the income for the bands will be £10,483, £9,000 and £9,000 for bands B, C and D respectively. • There is no longer any connection to the cost of delivering a subject.

5. An Opportunity This was a chance for the University to look again at the RASCAL Model, assess its suitability for purpose and consider ways to Improve it. Some of the problems identified with RASCAL were: • Departments understanding of the meaning of surplus/deficit. • What are the consequences if any of coming in over or under budget and if so do the departments understand these? • Motivational factors • Does the model encourage space savings? • Does the model encourage cost savings or budget padding? • It does not relate teaching experience to the financial position of a department • How can the widening participation agenda be built in fairly?

6. Competition between departments for “strategic funding” rather than taking into account the all expenditure in the department. • Non-equitability of weighting factors for COMA such as: • Drivers for space - studio space 50% discount • Teaching cost weightings - for overseas students 1.2 and PGCE 0.5 • Load weightings - some students receive an extra 10% load • Staff driver only includes academic and academic related staff not administrative or technical staff.

7. Principles adopted for new model The University decided to adopt the following principles • An income streamed model should be maintained • Where possible income should be distributed gross • A cross subsidy should be imposed to reflect the cost of teaching in different subject areas but this should be transparent Three models considered for cross subsidy were: 1. TRAC T national (average teaching costs across the sector) 2. HEFCE income stream (1.7,1.3.1.0) 3. TRAC T group A (Russell Group) The model for cross subsidy chosen was model 1 as this model will keep pace with the competitive environment and it is also data that HEFCE uses.

8. A chance for simplification RASCAL POT In order to move to a more transparent income streaming model it was felt that certain deductions from the RASCAL Pot should no longer be made and should instead form part of the Indirect (COMA) charge or be charged /credited straight to the departments. These are listed below: • Special Initiatives, CETL continuation and special factors – to become part of the new “Indirect charge”. • Development funding for studentships, strategic funding for pay and strategic funding for non pay – cost/credit to fall to departments. Items of expenditure that are decided at University level and so cannot be determined by Schools, such as bursaries, will still be deducted from the Pot. A consequence of this decision is that the gross income allocated to Schools will be higher than in the past.

10. INDIRECT CHARGES Cost of support service sections have in the past been apportioned on five principal drivers but in future it will be based only on two drivers, space and people (people being student load including PGR’s and all staff FTE’s). The term COMA charge is to be replaced by “Indirect Charges” in future and will include the Community Charge. This decision was arrived at after a great deal of thought about various options and modelling of numbers from those scenarios as shown in the following table. It is still a basic premise that the charge is based on perceived usage of University resources NOT a reflection of income in the School.

12. Consequences • Income allocated to the Schools will be a larger absolute amount. • Indirect charges will be a larger absolute amount. • Ignoring the cross subsidy, Schools with greater numbers of band D students will be better off. • The cross subsidy is designed to rebalance this. • The effect will be gradual as new regime students replace old regime ones over the next three years. 2015/16 will be steady state. • The new layout of the Business Plans is shown below: