A big-picture review of the full economic costs of university research says that audit trails should be tightened to ensure that institutions use the extra money they receive for the intended purposes.
The long-awaited review of the impact of full economic costing (FEC) by Research Councils UK and Universities UK was released this week.
It was commissioned last year to investigate the impact of the extra funding made available through FEC payments, known as FEC uplift. Since September 2005, these have been added to grants to cover the indirect costs of research, such as staff time, equipment and general infrastructure expenditure.
Under the system, universities use the Transparent Approach to Costing (Trac) to calculate the full costs of research, and the councils are then required to pay 80 per cent of the sum. Government departments are expected to pay 100 per cent, and the onus is on institutions to recover all FEC payments for industrial research.
One cloud hanging over the arrangements has been whether universities have used the extra money to improve research infrastructure, as was intended, or whether they have used it to bolster the volume of their work instead.
The review concludes that the general message "is a positive one". The sustainability of research has improved and there is no evidence of untoward behaviour on the part of universities.
However, the report, which makes 18 recommendations, says that sustainability, monitoring and governance must be strengthened, particularly as the research infrastructure deficit stands at £2 billion.
"Operating surpluses have declined since 2005-06 for the major research-active universities, and there is a risk that the current recession and the consequential movement in exchange rates, together with increases in higher education ... salary and utilities costs, may jeopardise the gains in physical and human sustainability that have been achieved," the report says.
"Sustainability reporting should therefore be given greater prominence both internally in universities and across the sector."
Explaining the findings, Alan Alexander, commissioner of the Accounts Commission for Scotland and chair of the review, told Times Higher Education that a mechanism was needed to ensure that FEC uplift continued to support research.
He said: "We believe that it does and we have no evidence that FEC has been used to increase the volume of research, but a working group should be established to provide a 'light-touch' sector-wide assurance and find a way of clearly comparing the cost of (research) in one institution with another."
He said that one option for strengthening the Trac system was monitoring the time academics spent on research projects, an area that in the past has proved controversial.
"Neither I nor the review thinks now is the time, but it is a question that remains open," he said.
Despite the belief among some researchers that their universities have been spending FEC uplift on unrelated infrastructure projects rather than passing it on to grant and contract winners, the review sides with the universities.
"It is for higher education institutions to manage sustainability across all departments, while clearly explaining to academic staff the basis on which FEC is calculated," it says.
It adds that universities should be bold in aiming to recover 100 per cent of FEC from Whitehall departments, noting that this will become increasingly important as the Government adopts a more competitive tendering process.
The review finds little evidence to support industry concerns that FEC payments are forcing firms to look overseas for research. However, it does call for a study to examine the issue.
Professor Alexander said: "We recognise the concern that industry has, but we require more evidence to see if any action needs to be taken."
THREE PENALISED FOR NON-COMPLIANCE
Sanctions have been placed on three institutions by Research Councils UK for not properly complying with its system to calculate the full economic cost of their research.
The results of a quality-assurance and validation audit that looked at how universities are complying with the Transparent Approach to Costing (Trac) methodology were released alongside this week's FEC review.
The audit details "significant" technical non-compliance in the higher education sector.
Of the 50 institutions audited, one third had "material instances" of non-compliance.
"Although the material impact on the rates charged to the research councils is broadly neutral, the significant level of issues raised ... gives cause for concern and validates the need for the quality-assurance and validation process," the report concludes.
It does not name the three institutions that have been placed under sanctions, but says they will suffer a 25 per cent reduction in funding on the proportion of funding that is non-compliant until the issues are resolved.
For details of the audit and the FEC, visit: www.rcuk.ac.uk.