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Executive summary

Purpose

1. This document reports on the outcomes of, and next steps arising from, the HEFCE consultation ‘Review of TRAC: Consultation on streamlining requirements and increasing transparency of the Transparent Approach to Costing’ (HEFCE 2012/28).

Key points

2. The Government’s 2011 White Paper, ‘Students at the heart of the system’ (June 2011), invited HEFCE to consult the higher education (HE) sector on ‘radically streamlining the reporting requirements of TRAC’. This recognised the importance of costing and pricing systems to the sector, as well as the need for HEFCE to be able to determine the costs of higher-cost subjects within its teaching funding method, and for a costing tool to support the allocation of publicly funded research grants. The White Paper also invited HEFCE to consider how Transparent Approach to Costing (TRAC) data might be used to promote greater transparency and inform the choices of prospective students, recognising the increasing accountability to students under the new arrangements for funding higher education.

3. To pave the way for such a consultation, HEFCE initially undertook a review of TRAC, advised by the TRAC Review Group. This group was chaired by an independent HEFCE Board member, with members drawn from across the key stakeholder groups. The group defined the scope of the review by considering fundamental questions about the rationale for the current TRAC arrangements under the changing higher education environment in England resulting from the White Paper.

4. As part of HEFCE’s review of TRAC, we commissioned consultants KPMG to gather evidence from its many stakeholders and analyse the current arrangements. The review also drew heavily on evidence in ‘Review of time allocation methods: A study by KPMG for the TRAC Development Group’.

5. The consultation document ‘Review of TRAC: Consultation on streamlining requirements and increasing transparency of the Transparent Approach to Costing’ (HEFCE 2012/28) presented the findings of the review and asked the sector for input on the key issues.

6. The ensuing consultation, which closed on 11 January 2013, elicited 98 responses from across the HE sector and other stakeholders. The TRAC Review Group considered the consultation responses and presented its report to HEFCE with recommendations developed in the light of respondents’ comments.

7. There was general, often overwhelming, support from respondents for most of the proposals in the consultation document, and positive and constructive contributions to the debate. There was strong support for TRAC as a whole, and overwhelming support for the current governance arrangements provided by the Financial Sustainability Strategy Group (FSSG) and the TRAC Development Group (TDG) for oversight and development of TRAC and financial management within the HE sector. The TRAC Review Group recommended that HEFCE should confirm its support for FSSG and TDG maintaining these existing roles.

8. There was widespread recognition of the work by FSSG and TDG on the Management Information Projects, and strong endorsement of this approach to sector-led collaboration on the development and sharing of good practice in costing and the use of cost information to support internal processes.

9. In the main, respondents were of the view that there are no alternative systems or processes that could offer greater benefits or lower burdens to institutions than TRAC, but that a number of steps could be taken to reduce the burden associated with TRAC. There was strong endorsement of the proposals for streamlining the TRAC requirements, improving guidance, adjusting dispensation levelsand streamlining the reporting requirements, with some clearly articulated priorities for improvements and suggestions for further enhancements.

10. In the light of the responses to the consultation, the TRAC Review Group has recommended to HEFCE that TRAC should be retained as a sector-wide approach to costing in the HE sector, but that there should be a clear programme of improvements to improve the administrative efficiency of the system and to enhance the benefits and uses of TRAC and TRAC data.

11. There were two areas which elicited strong objections:

  1. Publication of Annual TRAC data or TRAC for teaching (TRAC(T)) data on a named-institution basis: there was almost unanimous and strongly argued objection to this proposal. Given the strength of the responses confirming that higher education institutions (HEIs) consider cost data to be price-sensitive information which could influence behaviour in the market, the TRAC Review Group recommended that HEFCE should reiterate its commitment not to publish individual TRAC and TRAC(T) data.
  2. Streamlining TRAC reporting requirements and aligning these with the Annual Accountability Returns: while there was general acceptance of some of the proposals for streamlining the content of TRAC returns, and general support for combining annual TRAC and TRAC(T) in a single return to achieve efficiencies in validation and more timely completion of reporting, there was strong resistance to aligning the timetable for annual TRAC and TRAC(T) reporting with the Annual Accountability Returns in December. The TRAC Review Group recommended that HEFCE should not combine Annual TRAC and TRAC(T) reporting in a single return at this stage but should consider this following implementation of the new TRAC(T) reporting requirements for HEFCE-funded HEIs, and that HEFCE should work with the sector, through the British Universities’ Finance Directors’ Group (BUFDG) and other representative groups to explore the possibility of combining annual TRAC reporting with the Annual Accountability Returns, how this could be achieved and how obstacles might be removed or overcome.

12. Another issue which prompted extensive comment was the proposal for accountability through TRAC reporting for all HE providers in receipt of HEFCE grant funding. There was overwhelming endorsement of this proposal, but almost half of respondents commenting suggested that this requirement should be extended to all HE providers in receipt of fees via the Student Loans Company. We acknowledge the concerns raised about this issue, but the current legislative framework does not allow HEFCE to set regulatory arrangements for other HE providers.

13. The TRAC Review Group recommended that HEFCE should confirm that the requirement to implement TRAC-based annual reporting applies to all HE providers in receipt of HEFCE grant funding, excluding those regulated by the Skills Funding Agency.

14. The White Paper required HEFCE to consider the transparency of information for students, prospective students and taxpayers. There was almost unanimous opposition to using or publishing Annual TRAC data or TRAC(T) data for this purpose, with strong arguments that the data were not helpful for students and there were other better sources of information. The complexity of the data leads to a high risk of misleading or being misunderstood. The data were also considered to be commercially sensitive information, likely if published to impact on the market and thus contravene competition law. A significant range of alternative sources of information are already published which provide transparency on how the public investment in higher education is spent, and in the efficiency, effectiveness and quality of HE provision.

15. The TRAC Review Group recommended that HEFCE should reconfirm its commitment to publication of TRAC data at HE-sector aggregate and peer-group level only, and work to ensure better visibility of and access to the wide range of published data and reports about the public investment in and efficiency and effectiveness of the HE sector. The group also recommended that HEFCE should:

  1. Encourage HEIs and sector bodies to develop good practice in providing clear, meaningful and consistent information for students on how public funds and tuition fees are spent in supporting the student experience.
  2. Invite the Higher Education Public Information Steering Group as part of its 2013 to 2015 review to consider opportunities to enhance information on how HEIs invest public funds and tuition fees in support of the student experience.

16. The TRAC Review Group’s recommendations have been considered and accepted by the HEFCE Board, and an action plan has been agreed to implement the recommendations. We confirm the use of TRAC as a primary tool to: support costing in HEIs (as part of a suite of tools to provide management information); enable pricing and cost recovery for publicly funded research on a full sustainable cost basis; aid understanding of financial sustainability; and provide regulatory assurance to public funders of teaching and research. We have invited the TDG to develop and lead an improvement programme for TRAC, to streamline its requirements and enhance it to better meet the needs of HEIs and funders. We have asked the FSSG to oversee the programme, and to monitor yearly progress on its various elements.

17. We will also:

  1. Agree and implement changes to the TRAC reporting requirements, working in collaboration with Research Councils UK, and other UK HE funding bodies.
  2. Develop TRAC(T) requirements to meet HEFCE information requirements to inform HEFCE’s teaching funding method, and to better support the needs of HEIs.
  3. Following the implementation of the new TRAC(T) reporting requirements (for reporting by HEFCE-funded HEIs from 2013-14), agree with the TRAC Development Group, and BUFDG, a timetable for combining Annual TRAC and TRAC(T) reporting in a single return.
  4. Agree with Research Councils UK, other UK HE funding bodies and the TDG an increase to the threshold for eligibility for dispensation from compliance with the full TRAC requirements. (Note that all HEIs, whether eligible for dispensation or not, are required to submit annual TRAC and TRAC(T) returns.)
  5. Work with BUFDG, the Association of Heads of University Administration and TDG to establish how progress can be made towards combining annual TRAC reporting with Annual Accountability Returns, and to identify how this may be achieved and obstacles removed or overcome.
  6. Work with the Higher Education Statistics Agency (HESA) and others to ensure harmonisation, efficiencies and utility from the TRAC and HESA datasets, to support the review of the HESA Finance Statistics Return.
  7. Assess the overall accountability and regulatory assurance requirements as part of the development of the replacement for the financial memorandum between HEFCE and HEIs.
  8. Work with the sector through the BUFDG and the National Union of Students (NUS) to build on good practice in providing accessible and meaningful information for students about how public funds and students fees are invested by HEIs.

18. We are committed to improving the TRAC reporting requirements, and providing institutions with streamlined guidance, as quickly as possible. In the next 12 to 18 months we will work to revise the reporting template and agree initial changes with the sector, and to agree the implementation of a revised threshold for dispensation. We are also committed to delivering more transparent TRAC data, and ensuring that there is better visibility of, and access to other published data about, the public investment, efficiency and effectiveness of the HE sector.

19. The HEFCE action plan which sets out in detail our responses to the recommendations of the TRAC Review Group is at Annex A.

20. The TRAC Review Group concluded that if its recommendations are implemented TRAC will:

  • be less of a burden on staff and academics
  • provide more reliable and accurate cost information to HEIs and their funders
  • support increasing focus on decision-making for investment and sustainability
  • pave the way for more transparent information for students and taxpayers (although this will be best achieved by using a much wider set of data than is produced by TRAC alone)
  • support benchmarking and efficiency in HEIs, and thereby save institutional and public money.

21. The TRAC Review Group concluded, based on an assessment conducted by KPMG, that streamlining TRAC in line with its recommendations will reduce administrative burden by 5 to 25 per cent. However, the potential for reductions in burden will vary across institutions, and will depend on the extent to which TRAC is integrated into existing processes and supports internal information needs.

Action required

22. No immediate action is required, but institutions may wish to identify opportunities to improve the efficiency of their TRAC implementation and enhance the utility of the process to support their internal management needs. Institutions may also wish to engage with and contribute to the work of FSSG, TDG and others in implementing the recommendations from the review.

Date: 30 April 2013

Ref: HEFCE 2013/09

To: Heads of HEFCE-funded further education colleges, Heads of HEFCE-funded higher education institutions
Heads of alternative providers of higher education in England

Of interest to those
responsible for:

Senior managers; Finance; Planning; Governing bodies; Academic and administrative staff with an interest in TRAC or provision of information for students; NUS, Student representative bodies, students, prospective students and advisers to students

Enquiries should be directed to:

Heather Williams, tel 0117 931 7113, e-mail h.williams@hefce.ac.uk