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HEFCE closed at the end of March 2018. The information on this website is historical and is no longer maintained.

Many of HEFCE's functions will be continued by the Office for Students, the new regulator of higher education in England, and Research England, the new council within UK Research and Innovation.

The HEFCE domain - - will continue to function until September 2018. At this point we will close the site entirely and all its information will only be available from the National Web Archive.


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What is TRAC? When was it introduced?

The Transparent Approach to Costing (TRAC) is the methodology developed with the higher education sector to help them cost their activities. It is an activity-based costing system adapted to academic culture in a way which also meets the needs of the main public funders of higher education.

TRAC uses institutional expenditure information from published financial statements and ‘cost adjustments’ to provide the ‘full economic cost’ of activities. It therefore encompasses both the direct and indirect costs of activities and an adjustment to the historic expenditure to reflect the full, sustainable costs of the activities.

Since the introduction of Annual TRAC in 2000, the TRAC method has been developed to provide three further costing applications:

  • 'full economic costing' of research projects (TRAC fEC for costing research projects) - implemented from 2004-05 as part of the Government's reform of the dual support arrangements for public funding of research.
  • TRAC for Teaching (TRAC(T)) being used to cost the main fuding council funded teaching at subject level, with the main aim of informing the public funding of teaching (not implemented in Wales)
  • the TRAC-based Certificate of Methodology for EC Framework 7 (TRAC EC-FP7) - an optional method for costing projects funded by the European Commission

An explanation of the four TRAC applications can be found in the Appendix of TRAC: Policy overview (2009).

The data from TRAC provides institutions with key information that can help managers understand and manage sustainability issues.

The TRAC Development Group (TDG) is responsible for the TRAC methodology. TDG redeveloped the TRAC guidance to simplify and streamline the approach in 2014 and version 2.0 was issued in summer 2016.

A guide has been produced on TRAC for senior managers and governing body members. This provides useful background on TRAC and its role in informing the sustainable costs of the institution.

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Update on the impact of MSI in the 2016-17 TRAC return and charge out rates

Circulated by the TRAC Helpdesk on 19 January 2018

The Support Unit has received a number of questions regarding the impact of the MSI on the charge out rates. The note below provides a summary of the findings to date and outlines an exercise that has been undertaken in the last week to consider the queries received.

In the majority of cases the MSI is higher than the old adjustments combined. This was and is to be expected. The old RFI adjustment was based on MoD guidance from 2006 – it has therefore been understated for many years. For a number of institutions the adoption of FRS102 in 2015-16 also led to an upward shift in costs, which further impacts the cost rates. There is also a common theme whereby for many institutions (not all) the indirect rate increases and the estates rates reduce. It was always anticipated that the MSI would not be the same as the combination of the RFI and Infrastructure adjustment as the MSI is more closely aligned to the institution’s strategy and as already stated, the basis of the RFI was grossly out of date. Equally there is a different basis for apportioning the MSI to the TRAC categories and the research cost pools for indirect and estates.

The current basis for apportioning the MSI to the TRAC categories has been included in the TRAC returns for the last four years and has been agreed. However, given the importance of maintaining the integrity of the TRAC data a brief exercise has been undertaken with a small number of institutions to further consider the impact of alternative bases for apportioning the MSI. A group drawn from Financial Sustainability Strategy Group and TRAC Development Group considered the outcome of this brief and informal review and considered that although alternative bases of apportionment do affect the charge out rates, the results are not conclusive. The TRAC Guidance is therefore not being updated for this issue for the 2016-17 return. If your institution wishes to discuss their MSI further, they should contact the TRAC Helpdesk.

One point that was found helpful in considering the movement in the charge out rates was to combine the indirect rate with the estates lab and the indirect and estates non-lab rates and compare the movement at that level. It is also useful to acknowledge the impact that FRS102 had on the cost rates in 2015-16 when assessing the movement in the rates.

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How do I complete Table A1 of the Annual TRAC return from the financial statements?

The Annual TRAC return includes total income and total expenditure lines derived from the totals included in the institution's Consolidated Statement of Comprehensive Income, adjusted, where appropriate, in respect of pension costs, gains or losses on disposal of fixed assets, gains or losses on investments, the share of surpluses/deficits in joint ventures and associates, taxation charges or credits and non-controlling interests (in line with section of the TRAC guidance).

The total income figure reported in the Annual TRAC return should reconcile to the consolidated financial statements as follows (with relevant reference to the TRAC guidance):

  • total income as reported in the consolidated financial statements
  • plus gain on disposal of fixed assets (
  • plus gain on investments (
  • plus the share of operating surpluses in joint ventures and associates as reported in the consolidated financial statements (
  • plus taxation credits (

The total expenditure figure reported in the Annual TRAC return should reconcile to the consolidated financial statements as follows (with relevant reference to the TRAC guidance):

  • total expenditure as reported in the consolidated financial statements
  • minus costs or plus credits attributable to the deficit recovery plan for certain multi-employer pension schemes (
  • plus loss on disposal of fixed assets (
  • plus loss on investments (
  • plus the share of operating deficits in joint ventures and associates as reported in the consolidated financial statements (
  • plus taxation charges (

A worked example indicating the likely sources of information for completing Table A1 of the TRAC return from the financial statements is provided below.

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When RCUK undertake a review of the TRAC process, what are the requirements against which our systems will be assessed?

The RCUK Funding Assurance Programme (FAP) provides assurance on the regularity of expenditure to the Chief Executives of each of the Research Councils. Information about the FAP process can be obtained from the RCUK website, or by contacting RCUK directly.

RCUK will inform institutions how they will review TRAC systems in advance of each visit, and are likely to consider institutional self-assessment when designing their assurance programme.

The TRAC requirements that were included in the TRAC guidance for the year being reviewed are the requirements that an institution’s level of compliance will be reviewed against (summarised in the TRAC Statement of Requirements document for ease of reference).

The TRAC Development Group (TDG) has undertaken work to identify the more common areas where institutions may fall out of compliance with the TRAC requirements. To assist institutions in checking on their compliance, Annex 2.1b ‘TRAC assurance reminders checklist’ has been added to the TRAC guidance. This is a useful reference source of common issues for TRAC Practitioners when reviewing their own systems. It also contains a consolidation of the ‘What could go wrong’ sections of the TRAC Guidance.

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How should Research and Development Expenditure Credits (RDEC) be treated in TRAC?

A number of institutions have made RDEC claims. These are claims for a tax credit on eligible (not all) research expenditure. So financial statements for the year ending 31 July 2017 could contain income in respect of RDEC, and this income will be reflected in TRAC. This is a short-term benefit that is not expected to recur.

RDEC income, although not a long-term source of income, is indeed income for institutions and therefore it is right to be included as income within TRAC. In the financial statements, RDEC is accounted for in two places – income, and taxation. There is a gross income figure in income, but this is subject to a tax charge, which appears on the taxation line. Therefore the net income to the institution is RDEC income, less taxation on that income.

The Higher Education Statistics Agency (HESA) has included an additional column in table 5 to separate out the RDEC income which appears as income in the financial statements. The TRAC income allocation table (Annex 3.5a of the TRAC Guidance) reflects this, and allocates this income to ‘Other UK Government Departments’ in the Research sponsor-type analysis of the TRAC return.

Given how RDEC income was accounted for in 2014-15, it was agreed that it was more appropriate for TRAC to report the ‘Net RDEC income’ figure (gross RDEC income less the taxation charge on this income). Following the review of TRAC guidance for FRS 102, all tax charges are now included in TRAC expenditure. Therefore, for 2016-17, RDEC income should be included gross within TRAC income (see section and of the TRAC Guidance v2.2).

Further guidance on treatment of RDEC income in 2016-17 TRAC return

Circulated by the TRAC Helpdesk on 19 January 2018

A number of institutions have asked about the inclusion of Research and Development Expenditure Credit (RDEC) income in the MSI calculation. For some HEIs, RDEC income could have a material impact on the calculation of the EBITDA for MSI and the resulting cost rates. As a result of this, a refinement to the calculation of the EBITDA for MSI is required where the impacts are material on the EBITDA for MSI and/or the cost rates.

RDEC claims are claims for a tax credit on eligible (not all) research expenditure. Whilst the majority of claims were included in accounts for 2015-16 and 2014-15, financial statements for the year ending 31 July 2017 could also contain income in respect of RDEC, and in some circumstances, some future claims will also be possible. Whilst it is right that TRAC income includes the RDEC income, this is a short-term benefit that is not expected to recur and which is not generally regarded as necessary for an institution to be sustainable. Therefore, the EBITDA for MSI calculation should be amended to adjust for RDEC income. Please note, this is only an adjustment to the EBITDA for MSI and does not change how RDEC is reported in the TRAC return.

Although the principle has been agreed that an adjustment should be made, HEIs in receipt of RDEC income should undertake the calculation to determine its impact on both the EBITDA for MSI and the charge out rates. Institutions have the option of only making the adjustment to the return if the impact of RDEC is material. Therefore if the EBITDA for MSI figure and the charge out rates do not change by more than 10%, HEIs can apply materiality and not deduct the RDEC income from the EBITDA for MSI calculation.

HEIs should include a comment in their commentary document on whether they have assessed the change to be ‘not material’ and have chosen not to deduct RDEC income in their calculations.

For HEIs that received RDEC income in 2016-17, a revised TRAC return template will be available to you to download which will allow you to deduct RDEC income from the denominator of the MSI percentage calculation. HEFCE will be in contact with the relevant HEIs to provide further detail on accessing the revised template.

An illustrative example of the adjustment is included in the guidance note below.

Illustrative example of treatment of RDEC income in 2016-17 TRAC return

Download the Further guidance on treatment of RDEC income in 2016-17 as PDF (20 KB)

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How will the calculation of research income when considering eligibility to claim dispensation take into account the effect of volatility in research income resulting from the implementation of Financial Reporting Standard 102 (FRS 102)?

The impact of FRS102 affects research income that is received for revenue and capital purposes, and there will be variation according to whether the accrual or performance model has been selected as the accounting policy for government grants.

As the assessment of publicly funded research for dispensation purposes is an average taken over a five-year period, it is not expected that the impact of FRS102 will be material. Capital grants do, however, have the potential to distort the calculation of eligibility for dispensation.

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Page last updated 22 January 2018