Transparent Cost of Research

A promising start but where to from here?

What Is It and Why Participate?

• Process to identify indirect cost of Australian Competitive Grant (ACG) related research to assist Department of Innovation Industry Science and Research (DIISR) in the allocation of Sustainable Research Excellence (SRE) funding

• Obtain additional funding and increase transparency and accountability associated with the expenditure of government funding

Summary of Presentation

1. Background

2. Promising start

3. DIISR methodology

4. ANU Approach

a) General background

b) Financial results

c) Preferred method

5. Matters to be considered

6. Discussion and questions

7. Additional information

a) CAPs suggested by DIISR

b) Useful links

Background

• First considered by the ANU in June 2008

• Participated in work undertaken by Allen Consulting Group in 2008 and 2009 on behalf of DIISR

• Based on approaches identified under the UK Model to a degree

Background

• SRE focus to support research excellence and secure longer term sustainability of quality research

• SRE providing $510 million over 4 years 2009/10 to 2012/13

Background

SRE Funding - 2010• Base – 20% based on RIBG approach (share of ACG income)

• 80% linked to participation in SRE • Threshold 1 – based on ACG income up to $2.5m calculated by

applying RIBG approach• Threshold 2 – proportional allocation based on relative share of

ACG income >$2.5m moderated by performance (TC and ERA participation and HERDC publications data)

• Implementation funding provided in 2010 only to assist in meeting the additional costs applicable to participating in TC trial.

Background

SRE Funding - 2011• Base – based on RIBG approach (share of ACG income)

• Threshold 1 – based on ACG income up to $2.5m calculated by applying RIBG approach

• Threshold 2 – proportional allocation based on relative share of ACG income >$2.5m moderated by performance (TC outcome and HERDC publications data [Research Active Staff/weighted publications])

Promising Start

• Open minded approach by DIISR in the development of a TC model

• Option of 2 models to determine TC• Alternate and Preferred• Alternate model from high level data and all

universities should be able to undertake• No disadvantage provision for those adopting the

Preferred model if this resulted in a lower value where both approaches undertaken

Promising Start

• Use of a Trial Year approach to enable development of the model

• TC outcomes used as a moderator NOT a determining factor in the funding model

• Not a true ABC model

• Implementation funding for those participating in SRE and TC exercise

Promising Start

• TC Principles• Fitness for purpose• Simplicity• Cost efficiency• Transparency• Equity of treatment• No ‘double dipping’• Materiality• Reasonableness

DIISR Methodology

Universities to provide:

• Results of a ‘Staff time spent on ACG Research’ survey (Staff Time Survey)

• Report on the University’s Indirect Costs (IC)

DIISR Methodology

• Identify from Staff Time Survey the amount of time dedicated to ACG research as a proportion of Total Academic effort (Alternate method) or as a proportion of Total Research effort (Preferred method). Academic staff surveyed to determine time spent on:

• Research ACG• Research Other• Teaching• Research Training• Other (includes grant application and preparation)• Leave

DIISR Methodology• Determine ‘Allowable Indirect Costs’*

• Non academic salaries and on-costs

• Maintenance of physical infrastructure including most of IT

• Finance and insurance costs

• Other indirect costs

* For the Preferred method costs must be associated with research activities

DIISR Methodology

• Identify ‘Non-allowable Indirect Costs’• Academic salaries and on-costs• Scholarship payments• Depreciation• Borrowing costs• Commercial activity related costs• E-research/high performance computing costs• Joint venture and controlled entity costs• Costs of acquiring research animals

DIISR Methodology

• Alternate Formula• (ACG effort as a proportion of all research) x (FTE

effort of all research)/(FTE Academic total) x (Total Indirect Costs) = ACG related Indirect Costs

• Preferred Formula• (ACG effort as a proportion of all research) x (Indirect

Cost of Research) = ACG related Indirect Costs

DIISR MethodologyAlternative Method Preferred Method

Staff Survey Component

Research (ACG) X X

Research (Other) X X

Teaching X

Research Training

Other

Leave

Financial Data Component

Total Indirect Costs X

Indirect Cost of Research X

Research Active = Research (ACG) + Research (Other)

Academic Active = Research Active (ACG + Other) + Teaching

ANU Approach

• ANU provided financial data for both methods

• Utilise base data that is subject to audit • Annual Financial Statements

• Data is reliable

• Verified by external party to the University

• Provides Government with degree of comfort

ANU Approach

• Established a system generated report to identify contribution to P&L result by each Fund type*

• Report can be run at whole-of-University or College or Business Unit level**

• Can be reconciled back to P&L values

* Fund types Recurrent; Contract Research; Consultancy; Other = Trading Areas, Endowment, and Investment returns etc.

** Refer to Operational structure in following slide

ANU ApproachRecurrent ACGR

Contract Research

Other Contract

Research

ACGR Contract

Consultancy

Other Consultancy

Other Total

Op Income 835,469

Op Expense

Acad Salary 184,711

Non-Acad Sal 211,774

Services 264,159

Depreciation 49,546

Other 58,158

Total Op Exp 768,348

AFS P&L 67,121

ANU Approach - Alternate Method ResultTotal 2009 AFS Expenditure 768,347,013

A. Excluded Departments 168,740,071

B. Excluded Natural Accounts 250,364,457

C. Excluded Fund Types (except R Funds) 102,580,923

D. TOTAL INDIRECT COSTS 246,661,562

Schedule D: Indirect Costs

Non-academic salaries & on-costs 154,997,648

Cost of maintaining physical university infrastructure 30,893,596

Finance & insurance costs 3,225,871

Other costs indirectly associated with research and teaching

57,544,447

TOTAL INDIRECT COSTS 246,661,562

ANU Approach - Preferred Method ResultTotal Indirect Cost (of Research & Teaching) 246,661,562

A. Central Costs Exclusively Related to Teaching 1,757,235

TOTAL INDIRECT COSTS 244,904,327

Schedule B: Indirect Costs

C. Indirect Costs of Research:

1. 100% Attribution 70,427,311

2. Allocated Costs 75,463,918

3. Unattributable Indirect Costs -

D. Other Indirect Costs (not related to research) 99,013,097

TOTAL INDIRECT COSTS (C+D) 244,904,327

TOTAL INDIRECT COSTS OF RESEARCH (C) 145,891,229

ANU Approach

• Alternate methodology applied as prescribed by DIISR

• Preferred methodology adopted the approach outlined in the following slides

• This approach differs to DIISR Guidelines• May not be applicable to all universities• Our operational structure and physical layout allows us

to adopt a ‘predominance use’ approach

ANU Approach (Preferred Method)

• 21 Business Units considered to be predominantly Research oriented

• 10 Business Units considered to be predominantly Teaching oriented

• 29 Business Units are College or Central Administration

ANU Approach (Preferred Method)

• Cost of Research Recognition

• Direct

• Indirect

• Overheads

ANU Approach (Preferred Method)

Overhead Cost recognition

Recurrent Fund expenses associated with:• College General operations (administration of the

College)

• Central University Administration operations

• ANU Cost Allocation Proxies (CAPs) are applied to redistribute overhead costs to Teaching and Research Business Units

ANU Approach (Preferred Method)

Overhead Cost recognition – ANU CAPS College

• Total College expenses allocated to Business Units (BU) of the College based

• BU AFS Income/Total College AFS Income

ANU Approach (Preferred Method)

Overhead Cost recognition – ANU CAPS Central

• Current Replacement Value BU Buildings/Total Current Replacement Value of Teaching & Research Buildings

• Building Maintenance• Campus Wide Property Costs• Facilities and Services Division

ANU Approach (Preferred Method)

• Overhead Cost recognition – ANU CAPS Central• BU AFS Income/Total Teaching & Research BU AFS

Income

• University Executive• Finance & Business Services• General University Activities• Marketing and Communications• Statistical Services• Development Office

ANU Approach (Preferred Method)

• Overhead Cost recognition – ANU CAPS Central• BU Student EFTSL/Total Teaching & Research BU

Student EFTSL

• Division of Registrar and Student Services

• BU Raw Staff Numbers/Teaching & Research Raw Staff Numbers

• Human Resources Division

ANU Approach (Preferred Method)

• Overhead Cost recognition – ANU CAPS Central• BU Average of (Staff FTE + Student EFTSL)/Total

Teaching & Research BU (Staff FTE + Student EFTSL)

• Information Services (IT)

• BU Number of S Accounts Held 31 Dec/ Total Teaching & Research BU S Accounts Held 31 Dec

• Research Office

Matters to be considered

• How to address direct cost of academic salaries

• How to address depreciation

• Current DIISR approach is that the only functions of universities is Teaching & Research

• Move towards an ABC model in the future• Determine cost drivers• Understand true cost of Research and Teaching

deliverables

Matters to be considered

• System and administrative practice changes

• Significant cost in both time and dollars

• The work, fun, and challenges for us in identifying the real cost of Research and Teaching in our universities begins!!!

Discussion and Questions

CAPS suggested by DIISR

• Application of the following can be found in Guidelines for Assignment of the Indirect Costs of Research DIISR Paper 9 June 2010

• (F1)(F6)(F7B)(F9) Total Research Income (HERDC)/Total Income

• (F2A) Research Floor Space/Total Floor Space or

• (F2B) Current Replacement Value (Research Space)/CRV (Total Space)

• (F2C) [Research Only FTE + 40%(T&R) FTE]/[Total Academic Staff FTE]

CAPS suggested by DIISR

• (F3)(F7A) Average of {[Research Only FTE + 40%(T&R) FTE]/[Total Academic Staff FTE]} + (EFTL HDR Students/EFTL Total Students)

• (F4) {[Research Only FTE + 40%(T&R) FTE]/[Total Academic Staff FTE]}

• (F5) HDR EFTL/Total EFTL

• (F8) International HDR Student EFTL/Total International EFTL

Useful Links

•http://www.innovation.gov.au/Section/Research/Documents/IndirectCostsUniResearch.pdf•http://www.innovation.gov.au/Section/Research/Documents/FAQsSREFinance100610.pdf•http://www.innovation.gov.au/Section/Research/Documents/GuidelinesForTheAssignmentOfTheIndirectCosts100610.pdf•http://www.innovation.gov.au/Section/Research/Documents/SRE2010GuidancePaper.pdf

Useful Links

•http://www.rcuk.ac.uk/cmsweb/downloads/rcuk/reviews/fec/fecexecsum.pdf

•http://www.rcuk.ac.uk/cmsweb/downloads/rcuk/reviews/fec/fecreport.pdf

•http://www.rcuk.ac.uk/cmsweb/downloads/rcuk/reviews/fec/fecannex.pdf•http://www.rcuk.ac.uk/cmsweb/downloads/rcuk/documents/qavreport.pdf•RCUK website