The University of Sheffield
Finance

How finance works ... in the Higher Education Sector

Where does the money come from?

How does HEFCE calculate grants for teaching and research?

This summary explains how the Higher Education Funding Council for England (HEFCE) calculates its grants for teaching and research.  For a more detailed explanation HEFCE provides a description of how the grants are calculated.

The HEFCE provides the following types of grant: The University can choose how it spends most of the funding that HEFCE provides as long as it is consistent with the Financial Memorandum (the agreement between the University and the HEFCE setting out the University’s obligations in return for which it is eligible for funding).  Some elements of HEFCE funding are classed as ‘earmarked’ and can only be used specifically for the purpose for which they were provided.

Recurrent grant for teaching

The recurrent grant for teaching is made up of three main elements:

Mainstream grant

The mainstream grant for teaching is calculated as:


the previous year’s grant for teaching + allowance for inflation + allowance for approved additional student intake


as long as this amount (plus an assumed level of tuition fee income) falls within ±5% of a calculated standard level of resource.

The standard level of resource is based on the number of students and the subjects that they are studying. This way of calculating the grant gives the institution certainty over the level of grant it will receive even though there may be small variations in the number of students admitted.

If the grant falls outside the ±5% range, either HEFCE will adjust the level of funding or the institution will be required to adjust the number of students that it admits in order to bring itself back into the range.

In calculating the standard level of resource HEFCE takes account of the following factors:
  • the number of students who are eligible for funding (calculated as a full-time equivalent (fte))
  • the subject that the students are studying
  • a notional base level of funding per student (‘base price’)
The number of eligible ftes is determined from the historic student population plus any allowance for additional student intake that has been approved. Ftes are weighted to take account of the subject being studied. The weighted fte is then multiplied by a notional amount of funding or ‘base price’.

Students are allocated to categories according to the subjects that they are studying. Subjects are classified into groups known as ‘price bands’ which are given a weighting. The weighting determines the relative level of funding that is received for each student fte in the price band and is intended to reflect the relative costs of tuition. The 2009/10 price bands and weightings were as follows:
  • band A – the clinical stages of medicine and dentistry courses and veterinary science (4)
  • band B – laboratory-based subjects (science, pre-clinical stages of medicine and dentistry, engineering and technology) (1.7)
  • band C – subjects with a studio, laboratory or fieldwork element (1.3)
  • band D – all other subjects (1)
The base price for 2009/10 was £3,947. The level of funding for an fte (base price x weighting) in each price band in 2009/10 was:
  • band A - £15,788
  • band B - £6,710
  • band C - £5,131
  • band D - £3,947

The product of the weighted ftes and base price is added together to determine the ‘standard resource’ for the institution.

Targeted allocations

Within the recurrent grant for teaching HEFCE also provides targeted allocations for specific activities. The calculation of these allocations varies according to the activity.

In 2009/10 targeted allocations were provided for:
  • part-time provision
  • foundation degrees
  • accelerated/intensive provision (including long courses)
  • old and historic buildings
  • institution specific activities (specialised provision)
  • students in strategically important and vulnerable subjects (SIVS) that are studying for a qualification that is equivalent or lower (ELQ) to one that they already hold
  • teaching enhancement and student success
  • very high cost and vulnerable science subjects

Funding for widening participation

HEFCE provides funding to recognise the additional costs of recruiting and supporting students from disadvantaged and non-traditional backgrounds and those with disabilities.

The allocations are determined by formula and are split into three elements:
  • widening access – determined by the number of students coming from census wards with low higher education participation
  • disabled students – calculated pro-rata to the number of disabled student ftes

Recurrent grant for research

The recurrent grant for research is divided into four main elements:


Funding is also provided for London weighting and nationally important research libraries.

Mainstream QR

The recurrent grant for research is calculated as the sum of the following for each subject in the institution:


the weighting factor for quality of research x factor for volume of research activity x unit of resource for subject


Subjects are allocated to a Unit of Assessment (UOA) (68 in total) in which the quality of research is assessed under the Research Assessment Exercise (RAE).

In the 2008 RAE research outputs within each Unit of Assessment at the institution were assigned a quality between 0 and 4*. In aggregate these quality assessments generate a quality profile for the Unit of Assessment at the institution which shows the percentage of outputs achieving each quality assessment. For funding purposes a weighting is attached to the quality assessment as follows:

2008 RAE Quality Assessment

Quality Definition

Weighting Factor

0

Quality that falls below the standard of nationally recognised work

0

1*

Quality that is recognised nationally

0

2*

Quality that is recognised internationally

1

3*

Quality that is internationally excellent

3
4*

Quality that is world leading

7
The factor for the volume of research is the number of research active staff submitted to the 2008 RAE within the Unit of Assessment.

The unit of resource for each subject varies across subjects and is determined by measuring the total volume of research in that UOA across the entire sector multiplied by one of these weightings:

Group

Weighting Factor

A – High Cost Science

1.6

B – Intermediate Cost Subjects

1.3

C – Other Subjects

1

Research Degree Programme (RDP) Supervision Fund

HEFCE allocates its RDP supervision fund in proportion to the cost weighted PGR student fte in each UOA.


Charity support element

Charity support funding is allocated in proportion to the amount of eligible charity research income awarded to each institution in units of assessment rated 4 or above or those units of assessment rated 3a or 3b and in receipt of research capability funding.

To be eligible for funding the income must be:
  • awarded through open competition using peer review
  • awarded by a charity registered in the UK or an overseas body with exclusively charitable purposes
  • a maximum of £500,000 per annum if measured as a release from a deferred capital grant

Business research element

The Business research element of the recurrent grant for research is allocated in proportion to the amount of research income received by the institution from business sponsors.

Capital grant

The HEFCE capital grant is allocated by formula. This takes account of the HEFCE teaching grant, HEFCE research grant and research council project funding.

The learning and teaching element is allocated pro-rata to the institutions total teaching funding (including widening participation funds and funding from the Teacher Development Agency).

The research element is determined by these factors:
  • research income from UK Research Councils
  • previous level of Science Research Investment Fund (SRIF) allocations
  • recurrent research grant
  • research income from UK charities
  • research income from UK central government, local authorities, health and hospital authorities
In 2008 HEFCE allocated capital funding covering the period 2008-2011. Capital funding may only be used for supporting capital projects.



Higher Education Innovation Fund (HEIF)

The Higher Education Innovation Fund (HEIF) is provided to support and develop knowledge transfer activities.

HEFCE calculates the level of funding with reference to:
  • academic staff numbers (ftes)
  • income from business sources for various knowledge transfer activities (as reported in the annual HE-BCI return)

Other specific grants

HEFCE also provides funding for other specific initiatives in order to meet its strategic objectives. The level of funding and means by which it is calculated varies depending on the level and extent of funding. Most other specific funding is classed as ‘earmarked’ and may only be used for the specific purpose for which it was provided.