1. Financial Management for Research Managers Lucy Galloway School Accountant Alison Wilson HoSA School of Law

2. 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

3. 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

4. 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

5. 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

6. Stages of a Project Application Award Preliminary decisions Running the project End of the project – report writing/ evaluating/ final claim or invoice

7. “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. Definition of a Project

8. 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

9. 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

10. 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.

11. 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.)

12. 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

13. 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.

14. 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

15. 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.

16. 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

17. Estimates of PI time - exclude: Drafting and re-drafting proposals and supporting bids to funders Support activities (as defined by TRAC) Travel time

18. Estimates of PI time - show separately: Supervision and training of PGR students Recruiting PGR students

19. 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.

20. 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

21. 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.

22. 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

23. 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

24. 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

25. 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

26. 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.

27. Project Accounting

28. 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

29. 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

30. Finance Reports Understanding the finance reports

31. 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!

32. 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

33. 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)

34. 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

35. 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)

36. 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