Council TRAC Results

Transcription

1 Council TRAC Results Introduction Council is requested to note the TRAC results for , which are attached as Appendix One. Comparative results for have been restated to remove the impact on teaching and research results of moving HEFCE infrastructure investment funding from the former PCA and SRIF mechanisms to CIF. Council was provided with an overview of the TRAC and full economic costing process in April An extract of the paper is attached as Appendix Two. Reconciliation to published accounts Overall results show an FEC based loss of 12.2m ( 20.6m in ) comprising: Historic cost surplus Infrastructure adjustment Return for financing and investment Full economic cost return 15.6m m m m The infrastructure adjustment is a crude estimate of the surplus required to maintain the estate in good condition on a long term basis. The adjustment is significantly lower than last year ( 19.0m) due to a change in rules on older buildings. This reduction has a large impact on the teaching results. The return for financing and investment is a measure of the financing costs the University would have to pay if its capital structure wasn t publicly funded. Teaching m Change Income % Expenditure % Historic cost surplus/(deficit) % TRAC adjustments (10.2) (13.8) - 26% Net surplus/(deficit) % The surplus on non-publicly funded teaching has increased from 1.4m to 7.4m reflecting a 5.7m increase in overseas tuition fees and a 0.6m improvement in the University s share of the INTO results. The surplus on publicly funded teaching has increased from 2.6m to 13.2m. This is primarily due to increases of 8.3m in tuition fees and 2.0m in HEFCE recurrent grant. There was a 1.3m reduction in estates costs due to national changes to EMS rules on accounting for building voids. The infrastructure adjustment is 3.2m lower due to the change in rules on older buildings. Academic diaries showed an increase in teaching hours from 35% of the total to 37% reflecting the growth in student numbers and the increased focus on student contact time. However some support costs have moved from publicly funded to nonpublicly funded in line with the higher overseas student numbers. The surplus is used to fund the significant capital investment being made in the teaching estate and student experience (teaching room refurbishment, teaching lab refurbishment, Union Society project, computer cluster upgrades, King s Gate). 1

2 Research m Change Income % Expenditure % Historic cost surplus/(deficit) (17.7) (19.6) - 10% TRAC adjustments (10.4) (11.8) - 12% Net surplus/(deficit) (28.1) (31.4) - 10% The loss on publicly funded research improved from 12.9m (11% of income) to 10.6m (9% of income) reflecting the continued impact of FEC. Research Councils only fund 80% of fully allocated costs so, despite the impact of QR, there will always be a significant loss on publicly funded research. The loss on non-publicly funded research improved from 18.5m to 17.5m. Some 73% of our non-publicly funded activity is from UK based charities (75% in ) which contribute little if any margin a significant loss is therefore inevitable. RCUK confidence (and in particular individual research councils) in TRAC remains low due to the outcomes of the 2008 audit exercise and the indifferent support shown by the sector to TRAC results. Failure to restore confidence will increase audit coverage, lead to strong demands for all academics to be on 100% timesheet recording and ultimately threaten the gains made through FEC funding. It is essential that the sector (and the Russell Group in particular) work to build confidence levels. The subjective uncertainty of the diary exercise is seen as a key issue to address and we need to look at using workload models as our primary data source for this. Other Activities m Change Income % Expenditure % Historic cost surplus/(deficit) % TRAC adjustments (7.2) (8.1) - 11% Net surplus/(deficit) (4.6) 6.8 The key reasons for the significant reduction in net surplus were reduction in interest income ( 2.2m), the impact of FRS17 on pension costs ( 1.5m), the costs of the Great North Museum project ( 1.9m) and a correction in the treatment of research related donations ( 4.0m). The reduction in surplus on Other presents a significant challenge, particular as it is unlikely we will see this recover in the short term. The loss is due to lower interest rates and pension scheme losses. Without this surplus, we are wholly dependent on our core activities (particularly teaching) for future financial sustainability. Richard Dale Executive Director of Finance January

3 Appendix One Funding Council Grants TPF TNPF RPF RNPF PGR ROWN O Total HEFCE recurrent grant 64, , ,546 23, ,756 HEFCE specific grants 5, ,286 2,109 10,164 HEFCE deferred capital grants released in year , ,076 TDA recurrent grant 1, ,386 TDA specific grant Total 72, , ,546 27,531 2, ,456 Academic Fees & Support Grants Full-time students 38, , ,687 Full-time students charged overseas fees 0 22, , ,996 Part-time fees 1, ,709 Research training support grants , ,493 Short courses 0 1, ,401 Total 41,612 25, , ,286 Research Grants & Contracts Research Councils , ,982 UK-based charities , ,772 European Commission , ,807 Other grants and contracts ,504 8, ,894 Total ,293 31, ,455 Other Operating Income Residences, catering and conferences ,201 18,201 Other services rendered ,813 15,351 Health authorities 1, , ,587 13,159 Other income 1,693 5,017 5,055 3, ,671 39,282 Total 3,262 5,058 6,334 3, ,270 85,992 Endowment Income and Interest Receivable ,228 4,228 Less: share of income from joint venture 0-3, ,912 Total Income 117,655 26,183 65,053 34,459 20,525 27,760 73, ,505 School Costs Academic salaries 21,739 4,408 13,309 8,780 5,005 10,579 6,918 70,738 Administration salaries 4, , , ,157 10,821 NHS recoverable ,878 3,878 Other sals & Staff fees Research costs ,814 28,091 3, ,982 School non salary - CC 5, ,590 1,386 1, ,958 14,542 School non salary - OSR 2, , ,150 7,850 Student payments - department 2, , ,891 RA salaries ,152 1, ,553 Technicians salaries 2, ,263 1, ,326 Total 39,128 7,516 61,796 42,121 17,469 13,284 17, ,148 Central & Faculty Costs Business Devt ,322 2,823 Cent admin/finance 7,176 2,035 1,148 2,129 1, ,439 17,383 Estates 16,123 2,767 3,778 1,698 6,655 2,353 19,200 52,574 Faculty Office 2, ,074 1,666 1, ,739 10,335 ISS 6,216 1, ,869 11,377 Library 3, , ,409 Other ,269 24,070 Redundancy/vol sev Staff related ,312 Student payments - cent/faculty 4, , ,205 Student related 9,204 1, ,069 Total 50,500 9,726 10,277 7,492 14,803 4,477 53, ,783 TRAC adjustments Infrastructure adj 4, , , ,704 13,628 RFI adj 4, ,520 1,699 1, ,459 14,173 PGR/Own Research 6, ,234 9, Total 14,865 1,550 3,606 2,366-11,747 9,999 7,163 27,801 Net Cost Surplus/(Deficit) 13,163 7,391-10,627-17, ,634-12,227 3

4 Key to acronyms TPF TNPF RPF RNPF PGR ROWN O Publicly funded teaching home undergraduate and post graduate taught degrees Non publicly funded teaching overseas students, INTO, CPD Publicly funded research UK Research Councils, European Union, Government departments Non publicly funded research Charities, industry, non UK sources Post graduate research degrees Own funded research HEFCE QR income Other Including student accommodation, catering, interest and endowments, NHS trading, Great North Museum, consultancy, farms, INEX, IFRS17 adjustments 4

5 Appendix Two TRAC and Full Economic Costing (FEC) Report from Executive Board to Council April 2009 TRAC TRAC is the Transparent Approach to Costing. It is the standard methodology used by higher education institutions in the UK for costing their main activities (Teaching, Research, and Other) and is increasingly informing the public funding of HE. Introduction of TRAC was a government requirement, as a result of its Transparency Review and was implemented, progressively, from It persuaded the government to introduce Full Economic Costing (FEC) as the basis for research funding in giving further impetus (and new costing requirements) to TRAC. The more recent introduction of TRAC(T) to analyse teaching costs by subject will progressively inform the basis for HEFCE grant allocation. TRAC is a fully allocated Activity Based Costing review of the University s financial performance: It includes all costs and expenditure It includes an adjustment for the cost of financing and investment It includes adjustment for infrastructure The key underpinning data is a diary exercise of academic staff and Research Associates which requires a 75% response rate The national results for 2006/7 showed: The sector had a deficit of 1.4 billion (6.6%) Publicly funded research: deficit of 1.2 billion (27%) Non publicly funded research: deficit of 737 million (51%) Publicly funded teaching: deficit decreased from 3.1% in 05/6 to 2.7% in 06/7 Non-publicly funded teaching: surplus of 475 million (24.5%) HEFCE believe the success of the sector in implementing TRAC, and the support of the Treasury for TRAC has benefited all institutions both directly in terms of their funding, and indirectly through the confidence it has engendered in Government. Some 0.5bn p.a. of additional funding has been provided by the Government to make the UK s research base sustainable. TRAC has also contributed to the current policy interest in the sustainability of higher education, especially by highlighting the inadequate investments being made in infrastructure for Teaching and Research. The Government has provided extra capital funding, and all institutions are now required to take account of the full costs of their activities in their planning and management. Research Councils UK (RCUK) have recently completed a national audit of University compliance with TRAC and FEC rules. The Newcastle audit was carried out in Summer 2008 and only found one material error which has now been corrected. A follow up audit is planned in late April. RCUK will report shortly on their generic findings. The slightly piecemeal approach to the development of TRAC over the last eight years needs to be consolidated into a simplified and more holistic approach to costing and it is pleasing to see that RCUK intend to champion this. 5

6 Full Economic Costing (FEC) TRAC provides us with information on indirect costs which are used for costing research proposals to all Research Councils and most Government departments. These costs are automatically added to all research applications and comprise three elements: Estates cost University indirect costs School specific indirect costs They are recovered as a fixed cost per FTE engaged on the project. Two estates rates are calculated: one for lab based work and a lower rate for non lab work. There are also some specific consumption based charges for Major Research Facilities (e.g. large pieces of research equipment). Newcastle s principal indirect charge-out rates for 2009 are: Estates Cost Non lab based 7,735 Lab based 13,934 University Indirect Costs 29,798 These are relatively low compared to our peer group for Indirect Costs but relatively high for estates costs reflecting the high level of renewal activity in recent years. UK Research Councils have agreed to pay 80% of full economic costs. This replaced the previous funding formula of direct costs + 46% and has significantly improved the financial contribution from research activity in recent years (16% in 2003/04 to 25% in 2008/09). However the 80% formula will result in a continued, albeit reduced, deficit on research activity. It is also recommended as the basis for pricing corporate proposals, although this has met some degree of resistance. Charity bids do not include any recovery of indirect costs although HEFCE provide some funding support for Charity research as compensation. European research (EFP) bids currently fund direct costs plus a 60% mark up for indirect costs, although there is an intent to reduce this to direct costs + 40%. There is also a proposal to move to an amended version of FEC although it is uncertain whether this will be financially advantageous. Own Funded research is funded from the HEFCE QR grant and is also costed on an FEC basis. Richard Dale and Professor Tony Stevenson March