CASRAI Dictionary

Tag: transparent approach to costing

  • TRAC Review 2026: Why the UK’s Costing System Needs an Overhaul

    TRAC review 2026 refers to the renewed scrutiny facing the Transparent Approach to Costing (TRAC) — the 25-year-old methodology UK universities use to calculate the full economic cost (FEC) of teaching and research, and the basis for UKRI’s funded-research rates. A November 2025 report from the Policy Institute at King’s College London (KCL) argues TRAC data is inconsistent across institutions, under-used in governance, and too coarse-grained to support the benchmarking the sector now urgently needs.

    Transparent Approach to Costing (TRAC) is the UK higher-education sector’s standard costing methodology, developed jointly with funders and regulators to let institutions calculate the full economic cost of their teaching, research and other activities.

    What is TRAC and why is it under review now?

    TRAC was introduced across UK higher education roughly 25 years ago to give funders, regulators and institutions a shared basis for costing teaching, research and other activities. UK Research and Innovation (UKRI) uses TRAC-derived data to set the full economic costing (FEC) rates that determine how much of a grant-funded project’s true cost it will pay.

    The methodology has been reviewed before. The UK Higher Education Regulators and Funders Group (RFG) — comprising the Office for Students (OfS), UKRI, the Scottish Funding Council, the Higher Education Funding Council for Wales and Northern Ireland’s Department for the Economy — commissioned KPMG to review TRAC, publishing findings in November 2021. That review focused chiefly on reducing the burden of completing TRAC returns; its highest-priority recommendation, streamlining institutional governance sign-off, has since been implemented.

    The 2025 KCL Policy Institute report reframes the debate. Rather than asking whether TRAC is too burdensome to complete, it asks whether TRAC data is good enough to use — and concludes that, as currently structured, it largely is not.

    What did the King’s College London Policy Institute report find?

    The report, Broke and broken? What TRAC data tells us about higher education finances, was published by the Policy Institute at King’s College London on 11 November 2025, authored by research fellow Dr Eliel Cohen with commentary from Richard Salter, KCL’s Director of Analytics.

    Its central finding is definitive: TRAC data reveals a £5.4 billion shortfall in research cost recovery, systemic across grant types. UKRI’s funding model is built on covering 80% of the full economic cost of research council-funded projects, but the report shows actual recovery averages only 68%. Recovery for industry-funded and government-department-funded research fares only slightly better, at 75% and 76% respectively, while charity-funded research recovers just 56% of its true cost.

    Richard Salter said the TRAC return “has been a relative constant” through a period of major sector change, but warned that treating it “simply as a regulatory burden to be discharged as painlessly as possible” is no longer affordable. Dr Cohen added that the £5 billion research funding “black hole” comes as government policy leans toward universities doing less research rather than resourcing it properly.

    Why is TRAC data called inconsistent and under-used?

    The KCL report identifies four structural weaknesses that limit TRAC’s usefulness beyond its narrow regulatory function.

    • Inconsistent data collection across institutions, which undermines cross-institutional comparability.
    • Insufficiently granular breakdowns — TRAC does not routinely split costs by subject, course level or cost type, blocking meaningful benchmarking.
    • Missing contextual data, such as regional cost variation, estate size and performance metrics, that would let institutions interpret their own numbers.
    • Time lags in publication that reduce TRAC’s value for live financial planning decisions.

    These gaps compound a funding concentration problem the report also documents. Quality-related (QR) research funding and the Higher Education Innovation Fund together total almost £2 billion a year, yet 66% of that money goes to just 21 institutions — meaning QR cannot realistically plug research cost-recovery deficits for the rest of the sector.

    Funding source Recovery rate vs. full economic cost
    UKRI research councils (target: 80% FEC) 68%
    Government departments 76%
    Industry 75%
    UK charities 56%

    Charity-funded research is the weakest point on this table, made worse by the fact that UKRI’s dedicated fund supporting universities’ charity-partnered research has seen below-inflation increases for 15 consecutive years, according to the report.

    What would a modernised costing standard mean for UKRI FEC rates?

    A modernised TRAC would not, by itself, change UKRI’s 80% FEC policy — but it would change the evidence base that policy rests on. Granular, comparable, timely costing data would let UKRI and the sector negotiate FEC rates against a realistic picture of actual cost recovery, rather than the current aggregated 68% average that obscures wide variation by discipline, institution and grant type.

    The report’s authors point to the UK government’s post-16 education and skills white paper, which commits to working with the sector on cost-recovery and TRAC data use, as a genuine reform window. They also cite international precedent: sector-wide financial transparency agreements in Ontario, Canada, which have helped build trust between institutions and regulators through shared, comparable costing data — a model the UK’s Regulators and Funders Group could draw on as it takes forward its own TRAC recommendations.

    For research administrators, the practical implication is that better TRAC data would strengthen the case for full economic costing in grant negotiation, institutional strategy and governance reporting — shifting TRAC from an annual compliance exercise into an active decision-making tool.

    Frequently asked questions about the TRAC review

    What is TRAC in higher education?

    TRAC (Transparent Approach to Costing) is the methodology UK universities use to calculate the full economic cost of teaching, research and other activities. It underpins the FEC rates UKRI applies when funding grants, and has been in continuous use across the sector for around 25 years.

    Why is TRAC being reviewed again now?

    A November 2025 King’s College London Policy Institute report found TRAC data too inconsistent and under-used to support good decision-making, arriving as the government’s post-16 education white paper commits to working with the sector on cost-recovery reform, making this a live policy window rather than a routine audit.

    What does TRAC data show about UK research funding?

    TRAC data shows a £5.4 billion shortfall in research cost recovery. Against UKRI’s 80% full-economic-cost target, research councils actually recover only 68%, while UK charity-funded research recovers just 56% — a systemic gap across nearly every grant type.

    Who is responsible for reviewing TRAC?

    The Regulators and Funders Group — the Office for Students, UKRI, the Scottish Funding Council, HEFCW and Northern Ireland’s Department for the Economy — commissions TRAC reviews, including KPMG’s 2021 burden-focused review, and holds ongoing responsibility for TRAC guidance updates.

    Implications for research offices and what happens next

    For research administration offices, the KCL findings are a prompt to treat TRAC returns as strategic intelligence rather than a compliance box to tick. Institutions that build granular, subject- and grant-level cost breakdowns internally — beyond the sector-wide minimum — will be better placed to negotiate with funders and to model financial sustainability scenarios as the government’s international-student levy and tuition-fee changes take effect through 2026-27.

    The Regulators and Funders Group has not published a timetable for a further formal TRAC overhaul, and the KCL report is a policy intervention rather than a regulatory mandate. But with the post-16 white paper commitment on the table and sector deficits mounting, pressure for a more comparable, better-used costing standard is unlikely to ease. Research offices, funders and institutional leaders should expect TRAC’s governance and granularity — not just its administrative burden — to dominate the next phase of this debate.

  • UKRI FEC Grant Guidance: The 80% Recovery Rule

    UKRI FEC grant guidance sets out how UK Research and Innovation calculates and pays Full Economic Costing on research grants: UKRI funds a fixed 80% of a project’s full economic cost, the research organisation covers the remaining 20%, and costs are split into Directly Incurred, Directly Allocated and Indirect categories under the Transparent Approach to Costing (TRAC) methodology.

    Full Economic Costing (FEC) is the UKRI funding model under which a research organisation states the total cost of delivering a project — including staff time, estates and administrative overheads — and UKRI reimburses a fixed proportion of that total rather than reimbursing itemised expenses alone.

    What is UKRI Full Economic Costing?

    UKRI’s guidance on FEC grant terms and conditions states the underlying principle directly: research organisations indicate the full economic cost of a project in their proposal, and UKRI pays “a fixed percentage of 80% of this sum unless stated otherwise.” The remaining 20% must come from the research organisation’s own resources.

    Where a project also has external co-funding, for example from an industry partner, that contribution is treated as additional to FEC — UKRI still funds 80% of the remaining resources needed, rather than reducing its own contribution pound-for-pound.

    Several categories of cost fall outside the 80% rule entirely. Associated studentships are funded at 100% of UKRI’s standard annual stipend and fee values, and externally contracted social surveys are funded at 100% under the “Exceptions” heading. Postgraduate students are also excluded from the full-time-equivalent (FTE) count used to calculate estates and indirect charges.

    How are FEC costs categorised?

    UKRI’s FEC guidance divides every grant budget into three cost categories, and getting this classification right is the first task for any research administrator building a proposal. Each category is audited, funded and adjusted differently if a grant changes scope or ends early.

    Cost category Definition How it is evidenced
    Directly Incurred (DI) Costs explicitly identifiable to the project — research assistant salaries, consumables, travel, equipment under £25,000 Auditable cash spend, supported by timesheets and invoices
    Directly Allocated (DA) Shared resources used by multiple projects, including investigator time, pool technicians and major facilities Estimates applied at proposal stage; not vired or re-audited during the grant
    Indirect Costs Non-specific overheads — central administration, general laboratory and office consumables, some departmental services A standard rate per research FTE, derived from the institution’s TRAC return

    Estates and indirect rates are not calculated per grant. Instead, a university’s whole-institution TRAC return sets a standard charge-out rate per research FTE, which is then applied to every proposal. Institutions with under £3 million in annual public research income may instead use TRAC dispensation default rates, reviewed annually by UKRI and the UK higher education funding bodies.

    Project leads and co-leads can be funded up to 100% of salary, calculated on a notional maximum of 1,650 hours a year (37.5 hours a week across 44 weeks) — but this investigator time is itself only reimbursed within the overall 80% FEC envelope once combined with the rest of the project’s costs.

    What changed in UKRI’s 2025–2026 FEC guidance?

    UKRI’s FEC grant terms and conditions are not static, and the guidance has been revised twice in the current funding cycle — a detail research administrators updating budget templates should not overlook.

    • Equipment funding at 80% FEC. From 1 April 2025, UKRI moved to fund all new equipment purchases at 80% of FEC rather than the fuller funding some equipment previously attracted, with limited exceptions for dedicated infrastructure opportunities, instrument development awards, and international partner costs in OECD Development Assistance Committee-listed countries.
    • Capital equipment threshold raised. The threshold above which an item counts as capital equipment rose from £10,000 to £25,000 on the same date, reducing the number of smaller purchases that require separate capital justification.
    • No default expectation of matched funding. UKRI clarified that, unless a specific funding opportunity states otherwise, there is no default expectation that institutions provide matched funding on top of the standard 20% FEC contribution.
    • Tighter no-cost extension limits from 1 April 2026. Non-people-related no-cost extensions are now capped at six months over a grant’s lifetime, except in defined exceptional circumstances (such as ethics delays or export-control licensing under Trusted Research and Innovation); extensions approved before 1 April 2026 do not count towards that limit.

    UKRI has framed these changes as a response to its own Research financial sustainability: insights paper, which found research costs have outpaced available funding — the same “sustainability gap” that independent analysis by the Innovation and Research Caucus has linked to persistently low FEC cost recovery.

    How do research administrators apply FEC to a grant budget?

    Building a compliant UKRI budget starts with classifying every cost line as Directly Incurred, Directly Allocated or Indirect before a single figure is entered, since each category is treated differently at award and close-out.

    • Confirm the institution’s current TRAC-derived estates and indirect rates per research FTE before costing investigator and technician time.
    • Cost equipment over £25,000 as capital equipment, and expect it to be funded at 80% FEC rather than assumed to be fully reimbursed.
    • Identify any Exceptions items — associated studentships and externally contracted social surveys — and cost these at 100% rather than 80%.
    • Keep the full FEC figure, not just the 80% UKRI contribution, visible in internal costing tools, since the 20% institutional contribution must be tracked and reported against.
    • Reduce Estates, Indirect and Infrastructure Technician claims proportionately if a funded post goes unfilled or a staff member leaves more than six months before the funded period ends.

    At grant start, only Directly Incurred, Directly Allocated or equipment costs can be drawn down — estates and indirect costs cannot be claimed until the Grant Start Confirmation is issued. At close-out, Directly Incurred costs settle against actual expenditure, while Directly Allocated and Indirect Costs are paid as requested, provided the grant runs its full course and stays within the cash limit.

    FEC grant guidance: frequently asked questions

    What percentage of research costs does UKRI FEC actually cover?

    UKRI funds a fixed 80% of a project’s Full Economic Cost, with the research organisation providing the remaining 20% from its own resources. Some cost types are treated as Exceptions and funded at 100%, including associated studentships and externally contracted social surveys, so administrators should check each cost line against the exceptions list before assuming the 80% rate applies universally.

    What is the difference between Directly Incurred and Directly Allocated costs?

    Directly Incurred costs are auditable cash amounts spent specifically on a project, evidenced by invoices and timesheets. Directly Allocated costs are shared resources — investigator time, pool technicians, major facilities — charged on estimates rather than actual audited spend, and these estimate-based figures cannot be re-audited or vired once the grant is underway.

    What is TRAC and why does UKRI’s FEC guidance depend on it?

    The Transparent Approach to Costing (TRAC) is the agreed sector methodology UK universities use to calculate the full economic cost of research activity from their financial statements. UKRI’s FEC guidance relies on each institution’s annual TRAC return to set the standard estates and indirect charge-out rate per research FTE applied across every grant proposal.

    Has UKRI changed how it funds research equipment?

    Yes. From 1 April 2025, UKRI moved to fund new equipment purchases at 80% FEC rather than fuller reimbursement, and raised the capital equipment threshold from £10,000 to £25,000. Institutions costing equipment-heavy proposals need to budget the 20% shortfall rather than assume equipment sits outside the standard cost-share rule.

    What this means for institutions

    The direction of UKRI’s FEC guidance since 2025 is toward tighter, more explicit cost-recovery rules rather than looser ones: equipment now sits inside the 80% rule, extensions are time-limited by default, and matched funding is explicitly not assumed. For institutions already struggling with the FEC recovery gap documented in UKRI’s own sustainability insights work, each of these changes shifts marginally more cost risk onto the research organisation’s 20% contribution.

    Research administrators building budgets should treat the FEC grant guidance document as a living compliance reference rather than a one-off read: rates, thresholds and exception lists are reviewed and republished, and the terms and conditions in force at the time of a purchase or activity — not at the time the grant was awarded — are the ones that apply for audit purposes.