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
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
HE FUNDERS
TRAC lacks
credibility, is
intrusive, and is
an unnecessary
burden
PROFESSOR PERFECT
Source: Financial Statements
+ TRAC economic cost adjustments
TRAC process
Total
Costs
Cost of
Teaching
TAS
Direct
Costs
Staffing
Cost of
Research
SWARM/
TAS
Students
Indirect
Costs
Staff
Staff
Students
Cost of Other
Activities
Space
Space
TRAC Outputs
Teaching
income
Cost of
Teaching
Research
income
Cost of
Research
Other
income
Subject – FACTS
Average Cost of
Teaching
Surplus/
(Deficit)
TAS
Surplus/
(Deficit)
Students
Cost of Other
Activities
Surplus/
(Deficit)
Space
Full Economic Cost
Rates
for Research Grants
(=funding)
TRAC outcomes (2014/15)
Publicly
funded
teaching
NonPublicly
funded
teaching
Research
Other
Total
£000
£000
£000
£000
£000
Income (from financial statements)
146,123
49,808
99,868
34,986
330,785
Costs (from financial statements)
125,464
24,187
142,928
25,754
318,334
TRAC/economic cost adjustments
6,813
1,110
7,086
3,640
18,649
Total costs (TRAC full economic costs)
132,278
25,298
150,014
29,393
336,983
Surplus/(deficit)
13,846
24,511
(50,146)
5,592
(6,197)
% cost recovery (income / full economic cost)
110.5%
196.9%
66.6%
119.0%
98.2%
Peer group cost recovery
100.0%
157.7%
79.0%
116.8%
96.3%
Sector cost recovery
101.8%
138.4%
74.9%
109.4%
96.6%
Activity
(Results exclude non-repeat RDEC income £5.8m (Research) and UPP income £3m (Other)
Conclusion > high margin activity funds low margin activity
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…
Activity
Grants
UKRC
Grants Grants Grants
EU
Charities Govt
Grants
Other
Grants
Total
Own
funded
PGR
QR
Total
Research
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Income (from financial statements)
25,766
13,401
5,747
12,482
6,358
63,754
2,001
15,055
19,058
99,868
Costs (from financial statements)
33,363
18,963
11,814
17,980
9,063
91,183
21,695
30,050
142,928
TRAC/economic cost adjustments
1,577
904
531
809
421
4,241
898
1,946
7,086
Total costs (TRAC full economic costs)
34,940
19,867
12,345
18,788
9,484
95,424
22,593
31,996
150,014
Surplus/(deficit)
(9,174)
(6,465)
(6,598)
(6,307)
(3,126)
(31,671) (20,592) (16,942)
% cost recovery
73.7%
67.5%
46.6%
66.4%
67.0%
66.8%
8.9%
47.1%
66.6%
Peer group cost recovery
74.4%
69.8%
64.2%
80.2%
72.5%
73.1%
16.5%
59.2%
79.0%
(50,146)
If Exeter’s cost recovery on our current research activity was at 79.0%, the level of our RG
peers, rather than the 66.6% we achieve, we’d have extra income of over £18m per year!
ie (79.0% - 66.6%) x £150.0m = £18.6m
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
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
• There is also a guide for Senior Managers and Governing Body
Members published by the TRAC Development Group