Research report 02/07

Research relationships between higher education institutions and the charitable sector

A report by JM Consulting to the HEFCE on policy

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Contents

Executive summary

1   Introduction

2   Overview of activity

3   Benefits and issues in the relationship

4   The economics of research funding

5   Financial impact

6   Conclusions for policy

7   A way forward

Executive summary

1. The purpose of this study for the HEFCE, as described in this publication and the companion report (HEFCE 02/07a) is to map the range of research related links between charities and higher education institutions (HEIs) and to make recommendations on how these links could be developed to the mutual advantage of both sectors. The study covers the whole of the UK.

Charity-funded research in HE institutions

2. Charity-funded research is of vital importance to the higher education (HE) sector and to the national research effort. It is comparable in volume to research funded by the Research Councils - and within the medical field is significantly greater in volume. The rapid growth of charity funding in the biosciences, including the outstanding contribution of the Wellcome Trust, has enabled the UK to remain a leading player in an expensive and competitive area of science, with great benefits to the economy and to the health of the nation.
3. Charities are also significant research sponsors in the social sciences; social policy; and in the humanities. In these fields, there are few alternative sources of research funding, and charities have made a particular contribution. This has sometimes involved providing long-term support to researchers and groups and a stimulus to address issues of social, political and practical importance which are not always well recognised by traditional academic criteria, reinforced by the Research Assessment Exercise (RAE).
4. A large part of the research funded by charities is of high academic quality, and relevant to national needs. This could be described as equivalent to the work funded by Research Councils. At its best, charity funding can facilitate openness and cooperation between academics and institutions working for a common public good. Charities can also sometimes be more flexible and innovative than public funders, and this can foster excellent research.

Benefits and concerns in the relationships

5. Both HEIs and charities are generally pleased with their relationships in terms of the quality and relevance of the research, and their ability to do business with each other. However, there are a number of ways in which the potential of these relationships is not being maximised.
6. Firstly, HEIs could take a more strategic approach to their whole research enterprise. For many institutions, this is a core business, requiring long-term investment in staff and infrastructure, and careful management of their portfolio to maximise academic, social, and financial returns on the work. Secondly, there are important issues about professionalism in project management, for both charities and HEIs. Thirdly, HEIs need to give a higher priority to the management and support of research staff who are frequently employed on short-term contracts.
7. The most critical issue for this study is the financial return that HEIs receive on charity-funded research. Most externally funded research done by HEIs is priced considerably below the full cost of doing the work. This is a concern in the context of reductions in the unit of funding for teaching, and the past under-investment in infrastructure within HEIs. It will require solutions that are relevant across all HE activity. However, the focus of this study is on HEIs' research relationships with charities, which need to be on a sound financial and strategic basis for the future.

Financial context

8. The principle that charities do not pay indirect costs of project work (in contrast to the Research Councils, which contribute 46% on eligible direct staff costs) means that institutions need to understand the financial and infrastructure requirements of the mix of research in their portfolios.
9. The HE sector has accumulated liabilities in terms of under-investment in its research infrastructure: buildings; equipment; technical staff; IT; libraries and information resources.
10. Research funded by charities in HEIs is not formally supported within the dual support system, under which the funding councils' formula funding provides infrastructure support to the project grants provided by Research Councils. The scope of dual support is unclear. Some charities perceive that their research was included under dual support in the 1970s or early 1980s. However, the funding councils' funds for research have not grown sufficiently to underpin the growth in volumes of Research Council and charity-funded projects, and so, in effect, institutions have not had Treasury support for the infrastructure required to support charity-funded research.
11. In England, HEFCE do recognise this in the way they distribute their research funding (called quality-related research funding or QR). While QR has not grown enough to underpin the growth in charity-funded activity, HEFCE have allocated a proportion of their funds to institutions on the basis of income from charity-funded research. This is not widely understood in institutions, and this element of funding may or may not be used by them to underpin infrastructure for charity-funded research. (In Scotland, SHEFC makes a different redistribution of funding, one which recognises charity-funded research income.)
12. The HEFCE approach is not as advantageous for the HEIs as including charity-funded work within the dual support system (which would require a growth in total funds). Nevertheless, it means that in the most favourable circumstances (for a 5* biosciences department) the institution's cost recovery on charity-funded projects comes close to parity with that for Research Council projects. Both are in deficit.
13. There is evidence that deficits on investment in infrastructure and on current cost recovery are damaging the quality, breadth, and sustainability of the best UK research. Indicators of this include lost research output; difficulties in recruiting and retaining top research staff; and distortion of priorities and inefficient use of professional staff time. These strains are not dramatically apparent in research quality or outputs because academics and institutions make heroic efforts to work around problems, and any damage will only appear over long time scales. However, there is a cost in terms of lost opportunities, reduced productivity, and damage to future capability.
14. Overall, the current funding is not a basis for viable and mutually beneficial relationships between charities and institutions, particularly those with medical schools and an elevated level of charity-funded research.

Charities and indirect cost reimbursement

15. The convention that charities do not contribute to the indirect cost of research projects is just one stress on an already highly strained system. Many would accept that smaller charities, and those which depend on public donations, cannot afford to pay indirect costs without reducing the volume of research supported. The larger endowed charities argue that it is the Government's responsibility to ensure the basic research infrastructure. If they could not rely on this being in place, some charities might reduce their funding into UK HE.
16. Charities do contribute to the research infrastructure. This is often through additions (e.g. of equipment) to research grants, but also through specific schemes to fund equipment or other infrastructure. The current contribution of the Wellcome Trust through the Joint Infrastructure Fund (JIF) and the Science Research Investment Fund (SRIF) is outstanding in this regard.
17. We believe that charities are sympathetic to the needs of HEIs, and that there is a mutual interest in achieving a more sustainable funding basis for charity research projects. We advocate a tripartite initiative in which charities, HEIs and HEFCE would each contribute towards this. The spirit would be one of partnership of the HE and charitable sectors working together to maximise the benefits from limited funds for research, and investing to maintain the research base for the future. This should lead to a mutually beneficial something for something outcome for all.

A way forward

18. We do not believe that charities should pay the full economic cost of projects, or that the volume of such work should be cut back to the point where current funding would cover full economic costs. Both would be highly damaging to research relationships between the charity and HE sectors, and to the UK research base.
19. We propose a partnership approach, in which HEFCE would re-launch the dual support principle with QR funding ideally at the level that we now know (through the Transparency Review) is needed to underpin 'Research Council equivalent' research funded by charities, so that HEIs are not financially disadvantaged by doing such work.
20. In summary, our recommendations are:

    One: HEFCE should seek an increase in its research funds so that it can provide an explicit stream of additional infrastructure support to HEIs on their eligible charity-funded research. This will be a fixed sum which ideally should provide equivalent support to that which HEIs receive directly from the Research Councils, plus what they are assumed to receive through the dual support system in respect of Research Council grants. It would be distributed to institutions retrospectively.

    Two: HE institutions which wish to be eligible for this additional HEFCE infrastructure support for charity-funded research should implement good practice in research management to ensure that additional funding is used to support infrastructure and research careers in a sustainable manner.

    Three: Charities funding significant volumes of research in HE should be invited to commit themselves to pay the full direct costs of all projects, including a contribution to the (currently often hidden) costs of investment in people and project management in institutions. In return, they would benefit from knowing that the research they fund in HEIs would benefit from additional infrastructure support and a more sustainable research base.

    Four: HEFCE should establish a small group with representatives of both the charity and HE sectors to take these issues forward.

21. Changes along these lines are practical and necessary to achieve a sustainable basis for research relationships between charities and HEIs. This could transform the perception of charity-funded research and enable it to realise its full potential. Without such action, the issue of cost recovery will continue to damage relationships, and the UK risks losing its pre-eminence in many of research fields, and long-term damage to parts of its research capability.