AUDIT APPROACH TRANSPARENT APPROACH TO COSTING RETURNS RESEARCH & CONSULTANCY APPLICATIONS

1. AUDIT APPROACHTRANSPARENT APPROACH TO COSTING RETURNS RESEARCH & CONSULTANCY APPLICATIONS Colin DeckerAudit Manager Cardiff UniversitySwansea Universityemail : c.decker@cardiff.ac.uk

2. What are the audit objectives ? • Approved strategy is in place. • Implementation monitored at a corporate level. • Appropriate School data capture mechanisms in place to distinguish costs incurred between Teaching, Research and Other. • Financial reports and statistical returns are produced from accurate and authentic financial data. • Research and other projects are costed in accordance with TRAC/fEC cost principles. • Risks have been duly assessed and are effectively managed. TRANSPARENT APPROACH TO COSTING ANNUAL RETURNS

3. 1 Approved strategy is in place. Risk / Control Issue There is no clear strategy for the implementation of TRAC / fEC. Expected Controls • A strategy / policy has been documented and has been approved by Committee / Council. • The strategy / policy is supported by procedures for implementation. Risk / Control Issue Requirements and responsibilities have not been communicated to University personnel. Expected Controls • The requirements of and responsibilities for the Transparency Review have been defined and clearly communicated to all Heads of Schools and Directorates.

4. Risk / Control Issue Undue reliance for implementation is placed on one or two key individuals Expected Controls • A working group has been established to monitor the application of the TRAC / fEC costing principles to research projects, services rendered contracts and PF / non PF short courses. • The adequacy of cover for key persons involved with implementation has been fully assessed and appropriate action taken

5. 2 Implementation monitored at a corporate level Risk / Control Issue The University has not established a monitoring mechanism to oversee the successful implementation of the Transparency Review. Expected Controls • Council and Committee receive reports on progress of implementation. • A Working Group has been established. Risk / Control Issue The University’s approach to TRAC does not comply with the TRAC requirements, as stated in TRAC Guideline Volume II. Expected Controls The Working Group has received assurance that all of the requirements (listed in TRAC Volume IIA) have been complied with.[Ref:Page C.1 7]

6. 3 Appropriate data capture mechanisms Risk / Control Issue There are no data capture procedures to obtain accurate costing Information on Teaching, Research and Other. Expected Controls • Time allocation schedule response rates are monitored. • Academic staff statistics are accurate and are analysed by job class. • Research Postgraduates statistics are accurate and are analysed between laboratory and non-laboratory (generic) Schools. • A minimum of six costs drivers have been identified. • The models for direct estates and indirect costs are clearly explained.

7. 4 Financial reports and statistical returns are produced from accurate and authentic financial data. Risk / Control Issue Financial data is unreliable. Expected Controls • All internal and external cost reports are adequately supported. • There are appropriate reconciliations of cost and income analysis totals to financial account control totals to ensure completeness of financial data • Procedures for cost and income data capture are flexible to ensure that future requirements can be met

8. 5 Research and other projects are costed and priced in accordance with TRAC/fEC cost principles. Risk / Control Issue The TRAC / fEC cost principles are not applied in practice. Expected Controls • TRAC / fEC cost and pricing principles should be applied to : - research council funded projects - other research projects - services rendered contracts - publicly and non publicly funded short courses • Formal justification and approval is required where pricing does not recover the full economic costs. • Non-recovered costs are monitored centrally by a designated officer and reported to Committee.

9. 6 Risks have been duly assessed and are effectively managed. Risk / Control Issue Risk have not been assessed. Expected Controls • Risk are assessed annually for continued applicability. Risk / Control Issue Assessed risks have not been managed. Expected Controls • Defined risks are managed effectively to reduce possibility of occurrence, or to minimise their impact.

10. RESEARCH & CONSULTANCY APPLICATIONS What are the audit objectives ? 1 The policy and related procedures for applying for a research project have been documented. 2 A standard cost application template has been developed. 3 Assumptions for project estimates are documented. 4 There is evidence that the research application complies with the School Business Plan, University research strategy and ethics. 5 Risks have been duly assessed and are effectively managed.

11. Policy and Related Procedures • Risk / Control Issue • There is no clear guidance for making research applications. • Expected Controls • A strategy / policy has been documented and received approval by Committee / Council. • The strategy / policy is supported by procedures for implementation, and the timing of establishing a separate nominal ledger accounts code if the application is approved

12. Risk / Control Issue Requirements and responsibilities have not been communicated to University personnel Expected Controls • The requirements of and responsibilities for the applying for research projects have been defined and clearly communicated to all Heads of Schools and Principal Investigators. • Suitable training courses have been developed on research project applications for Principal Investigators and Support Service Staff

13. A standard cost application template has been developed Risk / Control Issue No guidance is provided to Principal Investigators for producing cost estimates as part of the research project applications process. Expected Controls • A research application costing template has been developed which analyses : • Directly incurred costs- researcher salary costs - names, time (hours)- PGR salary costs - names, time (hours) - technical / clerical salary costs- direct non-staff costs, excluding Estates costs. • Directly allocated costs- PI/Co-investigators – names, time (hours)- charges for laboratory technicians - directly allocated Estates costs (including infrastructure adjustment)- equipmentIndirect costsincluding ‘cost of capital employed’ (COCE) adjustment calculated for PI/researcher and PGR FTEs. • Exceptional items • A contact helpline has been established to provide practical assistance to Principal Investigators.

14. Assumptions for project estimates are documented Risk / Control Issue There is little or no evidence to support cost estimates made in research project applications Expected Controls • Guidelines provided to Principal Investigators require that all cost estimates used in research applications are documented and that assumptions used are clearly defined. • The cost assumptions made in the application should be clearly defined, to cover - all staff (names, grade, estimate of hours to be spent, - either gross salaries including employer overheads, or pay banding costs dependant on policy to be adopted

15. all equipment, ie - specialised equipment required- other equipment together with previous funding source (eg has research council already paid for equipment to be used on current project) - use of research facility equipment charge out rates - computing costs (where these are not included in indirect costs). All anticipated consumables have been included in the project cost application. • There are checks in place to ensure that the research project application cost estimates do not include double accounting.

16. Application complies with the School Business Plan, University research strategy and ethics Risk / Control Issue There is no confirmation that the research application complies with School or University strategy. Expected Controls • Research project applications should be approved by the Head of School.Applications should confirm compliance with School strategy and ethical guidelines. • The pricing of the project should seek to recover the cost estimates. Shortfalls should be justified, identifying other funding source. • RACD should monitor the project application for :- compliance with University strategy and research ethical guidance. - proper completion of the standard research cost estimate template. • This should be evidenced by an approved signatory of RACD. • RACD should negotiate the research project price with the sponsor, following best practice as advised by the Joint Costing and Pricing Steering Group (JCPSG) ie the Lambert model agreements for collaborative research (as appropriate).

17. Risks have been duly assessed and are effectively managed Risk / Control Issue Risks have not been assessed. Expected Controls • There is central guidance on applying risk assessment techniques to research projects. • The risks relating to the proposed research project have been assessed. Risk / Control Issue Assessed risks have not been managed. Expected Controls • The processes by which the assessed risks are to be managed have been defined. • The risk assessment is completed before the application is signed off by the Head of the related School.