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Full Economic Costs (fEC) of Research Projects . An Introduction Presented by:. Objective of Presentation. To introduce academics and administration managers to fEC as a basis for costing Research projects.

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objective of presentation
Objective of Presentation
  • To introduce academics and administration managers to fEC as a basis for costing Research projects.
  • To emphasize the support provided by Research Administration during and after project implementation.
  • To introduce a short summary of the costing requirement including changes to existing methodology.
topics of discussion
Topics of Discussion
  • Background - where did fEC come from ?
  • Why is fEC important ?
  • How is fEC calculated ?
  • Budgeting academic time.
  • Admin. support & implementation timescale.
  • Research Council Costing Requirement.
background where did fec come from 1
Background - where did fEC come from ? (1)
  • Transparency Review (TRAC) introduced 1998 in response to JIF and SRIF1.
  • HEIs more transparent about how they spend between Teaching (T), Research (R) and Other Activities (O).
  • Figures reported to Funding Councils and consolidated for UK sector.
  • UK sector figures showed big losses in R.
  • Treasury accepted conclusions: SRIF2
background where did fec come from 2
Background - where did fEC come from ? (2)
  • R project costs on a fEC basis (from TRAC).
  • Government emphasised HEIs should recover fEC to ensure sustainability of R.
  • Extra £120M pa for current volume of Research Council (RC) projects from 2005/06.
  • RCs will fund 80% of fEC - balance from institution’s funds and /or dual support (RAE).
  • Govt.depts.should fund 100% of fEC.
  • Charities ?
  • Lots of info at: http//www.jcpsg.ac.uk
slide6

Why is fEC important?

  • Sustainability
  • “ An institution is being managed on a sustainable basis if, taking one year with another, it is recovering its full economic costs across its activities as a whole, and is investing in its infrastructure (physical, human, and intellectual) at a rate adequate to maintain its future productive capacity appropriate to the needs of its strategic plan and students, sponsors and other customer requirements.” (Definition in TRAC Volume III)
  • Issues - fEC, strategic, pricing, project management/cost recovery, investment
a point to remember
A Point to Remember !
  • fEC is the methodology used to cost projects to ensure sustainability etc of Research.
  • Research proposals contain a PRICE for the Research which may be different to the cost.
how is fec calculated 1
Current Costing Method

RA costs

Technician costs

Non-staff direct costs

O/H recovery (if applic.) eg.46% for RCs

fEC

RA costs

Technician costs

Non-staff direct costs

Estates costs as direct

Indirect costs

PI costs

Replacement cost of departmental equipment

Estates now includes Infrastructure costs, Indirect costs now include COCE, both previously not included in College costs.

How is fEC calculated ? (1)
how is fec calculated 2
How is FEC calculated ? (2)
  • Estates costs as direct:

- RCs will fund. Other sponsors may follow.

- Charge on basis of £X / acad.staff member (FTE)

  • Indirect costs:

- Charge on basis of £X / acad.staff member (FTE)

  • PI costs:

- PIs to estimate time spent on projects (actual hrs)

- Apply cost according to grade of staff.

Research Councils will fund 80% of all of this on ESTIMATE. No need to record actual time by project for RCs.

Sponsored PGRs and equipment costs over £50,000 are exceptions to the rule.

budgeting academic time pi costs 1
Budgeting academic time (PI costs) (1)
  • Time should be estimated in actual hours.
  • Include time for project mgmt., writing papers, dissemination, etc.
  • Exclude PGR training/supervision unless it is a studentship included in the sponsor’s project.
  • PIs to keep simple records to verify time eg.notes/log book of events, meetings, etc.
budgeting academic time 2
Budgeting academic time (2)
  • No prescribed methods for estimating time .
  • Could base on hours required each month over project life; or on standard proxy e.g. [2 hours] a week per RA plus [2 hours] a week per project (more if more complex project)
  • Research Councils will be comparing estimates
  • Overall reconciliation (at institutional level) of estimated time with actual time spent (from annual TRAC time allocation schedule data)
administration support
Administration Support
  • Usual one to one support provided by Research Admin through application process.
  • All costing done within RACE 2 by authorized staff.
  • Database of estimated PI time on awarded projects will be kept to verify commitment of time.
  • RA contacts:
  • Unresolved Issues:
implementation timetable 1
Implementation Timetable (1)
  • January 2005:

fEC rates calculated

  • XXXXX:

Institutional systems for fEC established.

  • XXXXX:

Training on new processes provided.

Costing/managing projects on fEC basis begins.

implementation timetable 2
Implementation Timetable (2)
  • July 2005:

Release of RC forms

Training on new forms provided

  • September 2005:

All RC applications made (and funded) on fEC basis. Projects will start April-Dec.2006.

summary
Summary
  • Introduction to costing R projects on FEC basis.
  • Involvement of academics (budgeting time).
  • Central support from RAdmin.
conclusion
Conclusion
  • Potential increase in net R income from RCs (pa) c.£XX for (Institution name) in 2010.
  • Opportunity to improve cost recovery from other funders.
  • Improved resource will directly benefit R active academics.
any questions

ANY QUESTIONS ?

Open Discussion !

fec costing a
fEC Costing - a

Under fEC there is a subtle reclassification of certain categories of cost.

“Direct” costs remain.

Indirect costs are analysed and identified as either “Directly Allocated” or “Indirect” costs.

fec costing b
fEC Costing - b

DirectCosts

  • Research Staff Salaries

Researchers

Technicians (inc animal techs)

Other

Direct administration

Computing/computing support staff

Casual staff etc

  • Travel & Subsistence
  • Consumables
  • Equipment
  • Large Capital
fec costing c
fEC Costing - c

Directly Allocated charges

  • Principal Investigator
  • Other Academic staff
  • Other staff subject to Time Allocation excluded from “Indirect Cost” calculation
  • Replacement Cost of Departmental Equipment
  • Estates/Premises Costs ( as £/FTE Academic Staff & PGR’s)
fec costing d
fEC Costing - d

Indirect costs

  • Indirect costs

(as £/FTE Academic Staff & PGR’s)

fec costing e
fEC Costing - e

Under fEC the main changes relate to an analysis of “Overhead” charges. This identifies -

  • PI and Associates time.
  • Equipment.
  • Estates/Premises Costs.
  • Indirect Costs (All other overheads)
fec costing f
fEC Costing - f

New costs are introduced. - “Infrastructure” and “Cost of Capital Employed”.

  • Infrastructure cost is added to Estates/Premises cost to reflect the full long-term maintenance of College Infrastructure.
  • Cost of Capital Employed is added to Indirect costs to reflect the legitimate costs of running and financing the business.
fec costing g 1
fEC Costing – g.1

PI and Associates Time - 1

  • All Academic time to be identified and costed. (Includes Research Fellows).
  • Expressed as hours/day/week/year (not %).
  • £ per hour based on national fEC standard hours of 1650 pa (220 days @ 7.5 hrs per day).
fec costing g 2
fEC Costing – g.2

PI and Associates Time - 2

  • Includes ALL estimated time dedicated to project.
  • Time spent training/supervising PGR students to be separately identified.
  • These costs are charged to Directly Allocated Charges
fec costing h
fEC Costing - h

Other Staff

  • Non-academic staff subject to time allocation (principally Pool Technicians) will be charged to Directly Allocated Charges and their costs excluded from the Indirect Cost calculation in TRAC
fec costing i
fEC Costing - i

Equipment - New

  • All new equipment purchased for the project to be charged as Direct Cost.
fec costing j
fEC Costing - j

Equipment – Departmental etc.

  • Replacement cost charged to Directly Allocated Charges.
  • Formulated cost based on use/depreciation.
fec costing k
fEC Costing - k

Estates/Premises Cost

  • TRAC produces a £/FTE cost.
  • Based on total annual E/P cost adjusted for estimated use of existing equipment.
  • Relates to Academic R staff and PGR student FTE.
  • Nationally imposed and locally derived weighting. [Academic staff @ 1.0x fte, PGR Lab based @ 0.8x fte, PGR other based @ 0.5x fte]
  • These costs are charged to Directly Allocated Charges.
fec costing l
fEC Costing - l

Indirect Costs

  • TRAC produces a £/FTE cost.
  • Relates to Academic R staff and PGR student FTE.
  • Nationally imposed weightings. [Academic staff @ 1.0x fte, PGR @ 0.2x fte]
  • Calculated from all central costs. (College + school + department).
fec costing m
fEC Costing - m

Infrastructure Costs

  • Part of the TRAC basic calculation, additional to statutory accounts figures. NOT identified separately for fEC.
any questions34

ANY QUESTIONS ?

Open Discussion !

simple case study

Simple Case Study

Group Work

45 Minutes for Consideration

case study 0 1
CASE STUDY – 0.1

Question:

  • Calculate the fEC of the project based on the specific data.
  • Show the split of costs as follows:
  • Directly Incurred costs,
  • Directly Allocated costs,
  • Indirect costs..
simple case study41

Simple Case Study

Model Answer

case study 1 0
CASE STUDY – 1.0

Note 1: PI– to Directly Allocated

  • Annual cost = 750/5 x £60,000/1650
  • Annual PGR student support = 215 x £60,000/1650
case study 1 1
CASE STUDY – 1.1

Note 2: Co-Investigatorto Directly Allocated

  • Annual cost = 200 x £40,000/1650 year 1
  • Annual cost = 200 x £41,000/1650 year 2
  • Annual cost = 200 x £42,000/1650 year 3
  • Annual cost = 200 x £43,000/1650 year 4
  • Annual cost = 200 x £44,000/1650 year 5
case study 1 2
CASE STUDY – 1.2

Note 3: Research Assistant – to Direct

  • Annual cost = 1650 x £25,000/1650 year 1
  • Annual cost = 1650 x £26,000/1650 year 2
  • Note: Years 1 + 2 only
case study 1 3
CASE STUDY – 1.3

Note 4: Research Assistant – to Direct

  • Annual cost = 1650 x £30,000/1650
case study 1 4
CASE STUDY – 1.4

Note 5: 2 x Technicians – to Direct

  • (1) £20,000 each year (1 – 5)
  • (2) £15,000 year 1
  • (2) £15,500 year 2
  • (2) £16,000 year 3
  • (2) £16,500 year 4
  • (2) £16,500 year 5
case study 1 5
CASE STUDY – 1.5

Note 6: Dedicated Clerical post – to Direct

  • £20,000 year 1
  • £20,500 year 2
  • £21,000 year 3
  • £21,500 year 4
  • £22,000 year 5
case study 1 6
CASE STUDY – 1.6

Note 7: Travel – to Direct

  • Annual cost = £10,000
case study 1 7
CASE STUDY – 1.7

Note 8: Consumables – to Direct

  • Annual cost = £20,000
case study 1 8a
CASE STUDY – 1.8a

Note 9: Equipment – to Direct

  • £51,000 charged at start of project
  • £150,000 charged at start of project
case study 1 8b
CASE STUDY – 1.8b
  • Note 9: Equipment– to Directly Allocated
  • £49,000 across the 5 years = £9,800 pa.
  • Adjustment required to reduce Estates/Premises cost (double counted)
case study 1 9
CASE STUDY – 1.9

Note 10: Use of Major Research facilities– to Directly Allocated

  • Annual cost = 50/10 x £10,000
case study 1 10
CASE STUDY – 1.10

Note 11: Computing Costs – to Direct

  • Annual cost = £2,000
case study 1 11
CASE STUDY – 1.11

Note 12: Project Studentship costs/fees – to Direct

  • Annual cost = £12,000 stipend
  • Annual cost = £4,000 tuition fees
  • Annual cost = £1,000 training allowance
case study 1 12
CASE STUDY – 1.12

Supporting Calculations - 1

case study 1 13
CASE STUDY – 1.13

Supporting Calculations - 2

case study 1 14
CASE STUDY – 1.14

Supporting Calculations - 3

case study 1 15
CASE STUDY – 1.15

Supporting Calculations - 4

case study 1 16
CASE STUDY – 1.16

Supporting Calculations - 5

£23,000,000/1,030 FTE (SC3) =

trac full economic cost of projects fec 1
TRAC: full economic cost of projects (fEC) (1)

Direct Charges

[Can be vired during the life of the project, actual costs charged to sponsor. Note: possibly cash limited across life of project]

  • Research Staff Salaries

Researchers

Technicians (inc animal techs)

Other

Direct administration

Computing/computing support staff

Casual staff etc

  • Travel & Subsistence
  • Consumables
  • Exceptional Items
  • Equipment
  • Large Capital
trac full economic cost of projects fec 2
TRAC: full economic cost of projects (fEC) (2)

Directly allocated charges

[Cannot be vired during the life of the project, original allocated value only charged to the sponsor]

  • Principal Investigator
  • Other Academic staff
  • Major Facilities & External Facilities/labs
  • Replacement Cost of Departmental Equip
  • Other laboratory support staff
  • Estates/Premises Costs ( as £/FTE Academic Staff & PGR’s, or net £m2)
trac full economic cost of projects fec 3
TRAC: full economic cost of projects (fEC) (3)

Indirect costs

  • Indirect costs (as % of Direct Salary Costs)
  • Indirect costs (as £/FTE Academic Staff & PGR’s)
trac full economic cost of projects fec 4
TRAC: full economic cost of projects (fEC) (4)

General changes to practice

  • PI and other academic staff time now a direct cost (attributed) – attribution base is standard working year – 220days = 1650 hours [7.5 hrs per day, 37.5 hr week]
  • Estates/Premises now a direct cost (attributed) – by driver. TR produced driver cost table – inflation indexed.
  • Estates/Premises now include depreciation & an infrastructure charge.
  • Estates/Premises rate based on £/FTE (minimum requirement) - £/m2 (weighted) per project (best).
  • Estates/Premises will use £/FTE basis in majority of instances.
  • All major facilities costs are now a direct cost (attributed) where possible – by driver. Costed.
  • Laboratory support staff (technicians) not directly charged to the project are now a direct cost (attributed).
  • Indirect costs now expressed in £/FTE (academic staff & PGRs)
  • FTE numbers exclude PGRs funded by Research Councils as part of the grant.
trac full economic cost of projects fec 5
TRAC: full economic cost of projects (fEC) (5)

Cost Drivers

The annual estates/premises and indirect cost drivers must be generated through the Transparency process.

Once produced and satisfying the QA process these cost rates will be accepted without question by Government Departments and Research Councils.

trac full economic cost of projects fec 6
TRAC: full economic cost of projects (fEC) (6)

Costing & Pricing Projects

Government departments will normally fund 100% fEC. (HM Treasury letter 13/2/2004.)

Research Councils will fund a proportion of fEC, @ 80%. (Vol III p:20 Q+A.)

(Major equipment purchases – value over £50k - and student stipend etc are to be excluded from the % recovery formulae – 100% of allowable costs to be charged)

Research Councils are expected to increase the % of fEC to 100% by 2009/2010.

For other sponsors the fEC calculated will form the basis for the cost based pricing of the project.