Transcript Slide 1

Financial Management
for Research Managers
Lucy Galloway School
Accountant
Alison Wilson HoSA
School of Law
Aims of the Session
• To look at the importance of good
financial management of research –
offering practical tips and advice
• To look at how the income flows into the
School’s income and the contribution of
that income to the School’s bottom line
• Discussion of issues that commonly face
Research Administrators in the area of
research finance
Facts and Figures
• The University attracted over £273 million
in external research funding in 2008/09
• Total research expenditure at the
University has grown by 31% from £308
million in 2004-05 to £405 million in
2008/09
• Good management of research funding is
critical to the University’s continued
success
Who is responsible for
Research Finance?
• Principal Investigators (PI) with Research
Accounts Officers/ School Accountants (part
of Finance Directorate)
Financial Reporting for Sponsors and PIs
Open Account Codes; invoicing (drawing
down income; processing expenditure)
Provide interim and final expenditure
statements
Who is Responsible for
Research Administration?
Research Administrators
• Pre Award
 Funding Opportunities and Possible Partners
 FEC costing and Project Advice
 Electronic Submission
 Peer Review and Ethical Approval
• Post Award
 Forward Planning: Staff Appointments, Non-Financial
Reporting
 Financial Management
 Dissemination: Conferences and Seminars
Stages of a Project
•
•
•
•
•
Application
Award
Preliminary decisions
Running the project
End of the project – report writing/
evaluating/ final claim or invoice
Definition of a Project
“A project is a one-time job that has a
defined starting and ending points,
clearly defined objectives, scope and a
budget!” (James P. Lewis)
The need to plan, execute and report on
research projects efficiently, accurately and
on time is becoming ever more important – it
can affect future funding for the University.
Effective Financial Management
• Effective financial management of the project is
essential
• If the finances are not managed appropriately
we run the risk of the funder not paying and it
also puts the University’s reputation at risk
• All projects can be audited and therefore every
project needs to be managed so it is audit proof
Application - Pre-award
• Imperative that a realistic fEC costing is
put together at the outset
• All costings have to be carried out using
the University’s costing tool - Pfact
• Ideally finance should see the costing
prior to the application being submitted
• All applications need to be approved
before the application is submitted
Aims of fEC
• Manage the research activity on a
sustainable basis i.e., ensure that we
accommodate full economic costs within an
overall balanced portfolio of research which
is sustainable for the University; and
• Improve cost recovery by setting an
appropriate price for the grant or contract,
based either on the terms of the funder or by
reference to the Faculty/School pricing
policy.
Requirements of fEC
The full economic cost of a
research project will always be the
same, irrespective of the funder
type (UK Research Council,
charity, commercial organisation
etc.)
Advantages of fEC
• We can now recover PI and Co-Investigator time and
estates costs whereas in the past we could only
recover directly incurred costs and indirect costs
(overheads)
• Pre-fEC the amount the University had to contribute the
running of a project was an ‘invisible’ true cost it is now
more transparent under fEC
• In the majority of cases 80% of total costs (DI & DA) is
greater than 100% of DI costs alone. Therefore the
20% contribution is for accounting purposes so we can
see the full cost of research activities
Issues with fEC
• There are still academics who do not understand
fEC and do not see the importance of it
• In particular there are issues around
understanding that the allocated costs are not
under their jurisdiction, they see the bottom line
and think it is all available to spend
• Under fEC we work on the basis of 37.5 hours per
week x 44 weeks per year = 1650 hrs. Many
academics work 60 hrs per week x 48 weeks =
2880 hrs. Time allocation can therefore be
problematic, particularly if they are working across
several projects.
Getting the costing right - asking the
right questions?
• Where will the research be conducted?
• Which academics are involved and what is their time
commitment?
• Are there any external partners?
• What sort of costs will need to be covered
– Research Associate
– Admin support
– Travel & Subsistence
– Transcription
– Equipment
– Office costs
– Consumables etc
• Checklist of costs common to projects in your School is
a good idea
Estimating PI Time
• You need to estimate the total hours required for
the whole project and not focus on percentages of
time. The School has to use a robust method to
arrive at the estimate and retain supporting
documentation as evidence of this.
• The estimate of the PI’s time on the project includes
time they spend on activities defined as direct
Research under the TRAC methodology e.g.
managing the project, supervision of project staff
and direct research work.
Estimates of PI Time –
Include:
• Research work to create new knowledge
• Fieldwork, laboratory, studio, classroom work
• Management of projects, informal discussions,
progress reports etc.
• Recruitment and supervision of research staff
• Attendance at conferences, seminars and other
meetings directly connected with specific research
projects
• Production of research project reports and papers
and the dissemination of these
Estimates of PI time exclude:
• Drafting and re-drafting proposals
and supporting bids to funders
• Support activities
(as defined by TRAC)
• Travel time
Estimates of PI time show separately:
• Supervision and training of PGR
students
• Recruiting PGR students
Costing
•
•
•
•
It’s important to get as much accurate information from the
PI to be able to effectively cost the application.
Need to allow sufficient monies to ensure the project can
be delivered e.g. it’s possible to get a cheap return to
London, but can you rely on the academic to book ahead?
It’s safer to allow for the maximum cost of the fare at the
application stage.
More funders are requesting costs on an activity basis.
This is more complicated to do but more accurate.
If the costs maybe negotiated at the time of interview by
the PI (common with government departments) then it is
useful to prepare a number of scenarios to assist the
academic.
Costing/ Pricing
• All costs are calculated on a fEC basis, but for
some contracts we can set our own price
bearing in mind the market in which we are
operating.
• Currently Research Council’s pay 80% of fEC
and charities generally pay only directly
incurred costs and sometimes estates cost.
Government projects should be 100% of fEC
• Consultancies should always be priced at fEC
plus
Research Admin
• Costing Sheets downloaded from pFact into a
spreadsheet, fEC budget prepared from them and a
cost to funder budget (depending on the funder this
does not necessarily make indirect and estates costs
explicit i.e. hidden in daily rates).
• File created which contains the application, any
correspondence with the funder, costings and approval
form.
• If the application is successful this file can then go
through to the School Research Finance Officer.
• This becomes part of the project file where all details
relating to the project are kept in one file – this includes
staff appointments, claims, correspondence with the
funder etc.
Award
• The PI receives an award letter
• Check the fEC application budget matches
awarded value and amend if necessary
• School finance accept the award on behalf of
the PI and University and sign and return
acceptance letter to the funder
• Award details entered on the RMS system –
which interfaces with Oracle Financials
generating a unique account code – if a grant
this is done by Research Admin, if a contract
then the University Research Office do this
Preliminary decisions
• Although the RMS interfaces with Oracle financials
the budget does not transfer so this gives a window
of opportunity to make budget changes (provided
they would be permitted by the funder)
• It is a good idea for the PI to revisit the costing with
finance in order to identify the expenditure so the
correct tasks and i&e codes can be set up
• Look at the finances again and profile when the
expenditure will actually occur e.g. is a large
amount of equipment needed and when will it be
purchased, so under/overspends can be monitored.
This also helps with the School budget
Tasks and i&e Codes
• On oracle financials the tasks are set
up to match where the expenditure will
occur – most common tasks are:
academic staff; travel and
consumables
• Under the tasks are i&e codes which
break down the tasks further e.g.
travel broken down into UK and
Overseas
Accounting
The University has a devolved model for research
income so the research income comes into the
School. The School pays a tax to the University for
central costs
• Project account has charged to it directly incurred
costs such as RAs, non-pay costs, directly allocated
(PI and Estates costs) and indirect costs
• Contribution Account is a central School account
where the directly allocated staff costs; indirect
costs and estates costs are credited. If the project
is not covering the fEC then the shortfall of the
funding is debited from this account to the project
account
Accounting
The allocated and indirect costs are
charged to the project account and the
credit side of this journal goes to the
school contribution account. Against this
credit, the school contribution account
will be charged any shortfall in income;
in the example the shortfall is 20% of the
fEC - £73,709.91.
Project Accounting
Time Frame
01/01/08 - 31/12/10
Dr
INDIVIDUAL fEC PROJECT ACCOUNT
20**
Directly incurred: Staff
[Source: Payroll]
131,176.41
0230
Cr
3***
4***
Directly incurred: Non-staff
[Source: Purchase Ledger]
48,649.08
9483
9380
Directly allocated: Staff
[Source: Payroll Journal]
24,980.03
9381
Directly allocated: Estates costs
[Source: The Journal]
27,230.87
9382
Indirect costs
[Source: The Journal]
136,513.88
External (funder) Income
[Source: Sales Ledger]
Balance of project
funding
[Source: The Journal]
368,550.26
Dr
SCHOOL fEC CONTRIBUTION A/C
9383
Balance of project funding
[Source: The Journal]
9384
Research Support/l incentives @
10%
of Contribution
[Source: The Journal]
B
73,709.91
368,550.26
Cr
73,709.91
9380
11,501.49
9381
9382
A
294,840.35
Directly allocated: Staff
[Source: Payroll Journal]
Directly allocated: Estates
costs
[Source: The Journal]
Indirect costs
[Source: The Journal]
24,980.03
27,230.87
136,513.88
85,211.39
188,724.77
Contribution i.e., External funder income LESS Directly incurred costs
Contribution NET of financial reward to School Research Support and Incentives
Account
115,014.86
103,513.38
Running the Project
• Monitoring and control activities need to be in place to
ensure that the research stays on course. Be aware
of ‘scope creep’!
• Financial management is part of the PI responsibility
along with School Finance
• Finance check that there are sufficient funds in the
account before approving expenditure
• Regular project meetings ensures that any issues are
identified at the earliest opportunity and resolutions
put in place
• PIs should receive monthly reports on the project
account
Running the Project
• PI should meet with finance at least annually whilst
the project is running to take stock of where the
project is up to and whether any virements are
required subject to funder approval
• It is also useful for the PI to have a meeting with
finance six months and three months prior to the
end of the project to identify any under/over spends
• If over spends then PI needs to identify where
savings can be made otherwise the School will
have to make up the shortfall. If under spends then
there is time to identify other expenditure that will
add to the project
Finance Reports
• Understanding the finance reports
Running the Project
• PIs and finance need to comply with any
reporting requirements to the funder
• All expenditure on a research project must be
for the purposes set out in in the contract/
agreement with the funder. All projects are
potentially subject to audit either internally or
by the funder
• There are instances where PIs want to put
expenditure to a project but the activity the
expenditure was incurred for is nothing to do
with the project. This is illegal!
Running the Project
• Record keeping – it is good practice to keep
copies of everything on one file (financial
information – expenditure, claims/invoices,
correspondence with funder, correspondence
with any project partners). Makes it easier for
audit
• Record time – for EU projects this is a
requirement (timesheets). These need to be in
the finance file
Running the Project
• EU projects are the most difficult and complex in
terms of record keeping and having an adequate
audit trail. Liz Fay can advice
• RCs and Charities require claims of expenditure
incurred (usually every six months). Finance put
the claims together
• Government contracts tend to pay the amount
agreed, in stage payments, that we invoice and
do not always ask for a breakdown (but we can
be audited at anytime and therefore cannot afford
to have sloppy record keeping)
Running the Project
• Sometimes with Research Contracts the funder can
add additional work as the project evolves, this
requires an additional costing and a contractual
change which has to go by the Research Office
• Oracle financials then has to be updated to reflect the
additional funds or/and end date
• Sometimes projects have a no fee extension in order
to allow additional time. Caution needs to be taken
with recommending this as the allocated, indirect and
estates costs are still generated and have to be paid
End of Project
• Maximise project expenditure (important
for REF). With most funders you can
only claim what you have spent
• The last day of the project is the last day
expenditure can be incurred (although
not defrayed from the account)
Final Claim/ Invoice
• Final Claims/ Invoice are not usually paid until
the funder is satisfied with the work that has
been carried out
• PIs usually have to produce a project report by
a certain date
• Once final payment is received then the
project account is closed down – central
finance are pro-actively pushing for project
accounts to be closed down two months after
the end date of the project