What Are TRAC and FEC All About?
What is the Transparent Approach to Costing (TRAC)?
TRAC is an activity based costing system designed for use by Higher Education in the UK. Funders of Higher Education, including the Office for Students (OfS) and UK Research & Innovation (UKRI) requires all institutions to apply the TRAC system, if they want to be eligible for funding.
How does the TRAC system work?
The TRAC system takes the costs, as reported in the University’s published financial statements, as the starting point. These costs are uplifted by the Margin for Sustainability and Investment (MSI). The MSI is based on the average of our actual financial performance over the previous three years and our forecast performance over the next three years. It is intended to provide a measure of the cash that we need to generate in order to sustain our future plans for investment. The uplifted costs are known as the full economic costs (FEC).
In the TRAC system we apportion the FEC between activities. The activities defined within TRAC include:
- Publicly funded teaching (predominantly Home taught students)
- Non-publicly funded teaching (predominantly Overseas taught students)
- Research (this includes sponsored research, own funded research and PGRs)
- Other activities (this includes the provision of accommodation, catering and other services provided on a commercial basis).
Some costs are specific to an activity, for example the cost of research assistants employed on a specific project. These costs are directly assigned to the activity. Other costs need to be apportioned using relevant data (known as ‘drivers’). For example, space costs are apportioned to departments and activities based on the space occupied. Similarly, student support service costs are apportioned based on student numbers.
Staff costs, within academic departments, are apportioned based on the results from the time allocation survey (TAS). This survey is carried out every three years and the results are reviewed annually and updated, if necessary, by Heads of Departments.
How is the information used?
TRAC data determines the rates that UKRI allows us to charge in order to recover the overheads associated with research activity. The rate is set as £X per academic member of staff working on a project. The current rate is recorded within the Costing & Awards Tool (previously known as URMS).
Another output from the TRAC system is the calculation of Subject FACTS – the full average cost per OfS funded taught student by subject area. This data informs OfS work to set the funding level for each subject area.
The OfS uses TRAC data, together with other information, to inform its monitoring of the financial health and sustainability of the sector. In connection with this, it publishes a report on the TRAC results across the sector. The Government can also use this information to help inform policy decisions. For example, TRAC data provided evidence of the potential financial impact on the sector if overseas student numbers changed significantly and the TRAC cost per student was taken into account by the Augur review.
Within the University, we use TRAC data to inform costings and sustainability assessments. It is also linked to our Process for Budget Allocation.
How do I find out more about TRAC?
The TRAC Development Group has produced a helpful guide.
If you have any further questions, please contact Paul Woodhouse (email@example.com) in the Department of Finance.