Access Keys:

RCUK Logo


Efficiency 2011-15: FAQs

General

Efficiency Savings on Research Council Grants

Efficiency Savings in Capital and Equipment Funding

General

Why is RCUK applying efficiency savings to the research base?
In the current period of public financial constraint, RCUK is committed to ensuring the long-term financial sustainability of the research base. The current efficiency savings programme follows a review led by Sir William Wakeham (Financial Sustainability and Efficiency in Full Economic Costing of Research in UK Higher Education Institutions) which made specific recommendations for placing efficiency targets on HEIs to reduce their institutional indirect running costs.

In addition, as part of the December 2011 budget allocation announcements, the Research Councils were given specific targets on the efficiency savings to be made over the spending review period, which also included pay-restraint savings on the salaries costed onto Research Council grants.

The sector is already making progress itself in achieving greater efficiency. Does RCUK recognise this?
RCUK both recognises and welcomes the progress already being made by the sector. Through consultations with the sector RCUK has tried to ensure that the administrative burden on the sector is minimised, but we also very much appreciate the input and help that ROs have given in implementing the scheme. In the current period of financial constraint, it is vital that Research Organisations (ROs) continue to do everything possible to maximise the efficiency of their research operations.

The efficiency savings being made on Research Council grants are themselves being re-invested in UK research to help ensure that the UK can retain its world-leading research position in spite of the constraints on public funding.

The UK research base is highly successful and has a vital role to play in the Nation’s future growth, prosperity and wellbeing. Greater efficiency in the research base will be necessary to ensure that there are resources available to underpin the excellence of UK research, and so ensure that it continues to make an impact on the growth, prosperity and wellbeing of the UK.

How will RCUK make the efficiency savings required?
Efficiency savings in Research Council funding are currently being sought in relation to research grants and in relation to Research Council institutes and facilities. In relation to efficiencies in the funding of Research Council grants, these are achieved in two main ways - through the application of an efficiency factor to the indirect costs on research grants, and by reducing the indexation rate used on research grants. These apply both to new grant awards and to the remaining payments on grants awarded in the past.

A parallel programme of efficiency savings is also being expected of Research Council institutes and facilities – including both pay-restraint targets and savings from lower research running costs.

Details of the background to the efficiency savings methodology, the definition of and assignment of Research Organisations to Efficiency Groups and the application of the associated efficiency factors to new and current grants are given in Efficiency 2011-15: Ensuring Excellence with Impact.

Efficiency Savings on Research Council Grants

How will ROs be assigned to efficiency groups for 2012/13 and subsequent years?
As in the first year of the Wakeham efficiency programme (2011/12) RCUK will allocate ROs to Efficiency Groups based on two main factors: the first factor considers the relative position of an RO’s indexed indirect cost rate in a ranked list of costs across the sector and the second factor looks at the relative change in an RO’s indexed indirect cost rate. This combination of factors will continue to be used for subsequent years.

How will RCUK determine the efficiency factors for the efficiency groups for 12/13? Will this stay the same for subsequent years?
The values of the Efficiency Factors assigned to the Efficiency Groups will be set in order to meet our overall savings targets and will be determined on an annual basis, based on the progress being made in reducing the indirect costs of research.

Do the efficiency factors assigned for this year only apply for this year?
At the start of each Research Council financial year (April) RCUK will allocate each RO to an Efficiency Group with an associated Efficiency Factor. This factor will be applied to any grant awarded during that year and the same Efficiency Group and Efficiency Factor will continue to apply to those grants for the following years. So in the second year of the programme (2012/13) an RO may be receiving funds for grants awarded in year one (2011/12) which are adjusted based on the efficiency group to which the RO was allocated in year one and also funds for grants awarded in year two (2012/13) which are adjusted based on the efficiency group to which the RO was allocated in year two. In the third year of the programme (2013/14) an RO may be receiving funds for grants associated with three different efficiency groups.

The Guidance relating to changes to indirect cost grant submissions from 1 July 2011 on the RCUK website refers to the efficiency factor being applied cumulatively. How will this be applied?
For grants awarded in year one of the programme (2011/12) which continue to receive funding in the following year(s) the efficiency factor is applied cumulatively as shown in the table below:

 

Efficiency Group (2011/12)  Efficiency Factor 2011/12  Efficiency Factor 2012/13  Efficiency Factor 2013/14  Efficiency Factor 2014/15 
0%  0%  0%  0% 
1.0%  2.0%  3.0%  3.0% 
2.0%  4.0%  6.0%  6.0% 
3.5%  7.0%  10.5%  10.5% 
5.0%  10.0%  15.0%  15.0% 

 

As noted in the guidance the cumulative impact will be limited to three years from the start of the grant; from years four onwards the year three factor will be used to reduce the indirect costs.

For grants awarded in year two of the programme (2012/13) which continue to receive funding in the following year(s) the efficiency factor is applied cumulatively as shown in the table below:

 

Efficiency Group (2012/13)  Efficiency Factor 2012/13  Efficiency Factor 2013/14  Efficiency Factor 2014/15  Efficiency Factor 2015/16 
0%  0%  0%  0% 
1.5%  3.0%  4.5%  4.5% 
3.0%  6.0%  9.0%  9.0% 
4.5%  9.0%  13.5%  13.5% 
6.0%  12.0%  18.0%  18.0% 

 

All grants awarded during the four years of the efficiency programme will continue to have the appropriate efficiency factor applied for the full duration of the grant.

As originally envisioned this approach would continue for the full duration of the programme (2011/12 to 2014/15) so that grants awarded in 2014/15 would potentially have the efficiency factor increased cumulatively in both 2015/16 and 2016/17 with the three-year limit applying as stated from the fourth year of the grant (2017/18). Following feedback from the sector it has been agreed to reduce the impact of this cumulative effect so that it only extends into the first year of the next SR (on the assumption this is 2015/16) which provides some continuity without imposing the current approach too far into the next SR before any savings targets beyond 2014/15 have been determined.

The effect of this is demonstrated in the two tables below with a worked example of a 5-year grant with £100k indirect costs and a 2% efficiency factor and the shaded cells showing where the efficiency factor has been capped. Table 1 shows the original proposed methodology and Table 2 shows the revised approach with the cumulative increase limited to 2015/16. The cells with darker shading in Table 2 show where this differs from Table 1.

Table 1 (Original methodology)

 

   Current SR Period   
  2011/12  2012/13  2013/14  2014/15  2015/16  2016/17  2017/18  2018/19 
Grants starting in 2011/12  98k  96k  94k  94k  94k       
Grants starting in 2012/13    98k  96k  94k  94k  94k     
Grants starting in 2013/14      98k  96k  94k  94k  94k   
Grants starting in 2014/15        98k  96k  94k  94k  94k 

 

Table 2 (Revised methodology)

 

   Current SR Period   
  2011/12  2012/13  2013/14  2014/15  2015/16  2016/17  2017/18  2018/19 
Grants starting in 2011/12  98k  96k  94k  94k  94k       
Grants starting in 2012/13    98k  96k  94k  94k  94k     
Grants starting in 2013/14      98k  96k  94k  94k  94k   
Grants starting in 2014/15        98k  96k  96k  96k  96k 

 

Do research organisations have to apply the 12/13 efficiency rate in their own costing of grants submitted to research councils?
No, Research Organisations should submit proposals to us as normal, and then we apply the efficiency factor to the indirect cost element in the grant upon award. I.e. we are not expecting ROs to apply the efficiency saving % to their indirect costs: we apply this and the reduction will be shown in the grant awarded.

What is the split of efficiency savings between research grants and Research Council research institutes and facilities for 2012/13? Will this stay the same for subsequent years?
The Research Councils have been set efficiency saving target for the spending review period and are planning to achieve these efficiencies in regard to both research grants and Research Council institutes and facilities. The split of efficiency savings between research grants and research institutes and facilities shown in the table below has been based on the projected split of Research Council funding between these two headings for the years of this spending review period. If there are changes in this balance of funding, this will be reflected by a change in the respective targets.

  (£M)    
  Research Grants Institutes  Total 
2011/12 £21.7   £8.8  £30.5 
2012/13 £61.2   £21.0  £82.2 
2013/14 £104.2  £34.3  £138.5 
2014/15 £133.6   £43.0  £176.6 
Total £320.8   £107.1  £427.9 

 

How do the Wakeham savings apply to collaborative grants - for example, when collaborators are in different efficiency groups? How should institutions recover collaborator costs?
In the case of Collaborative Grants (where there is research activity funded from the grant at more than one institution), the Research Councils will apply the Efficiency Factor relating to the lead institution and invoice the lead institution accordingly. It will be for the lead institution to seek to pass on the efficiency saving requirement to the other institutions being funded from the grant that it holds.

How will the top-slice be applied for the duration of existing grants?
When the Wakeham efficiency programme was introduced in 2011 it was necessary to invoice institutions to recoup funding representing the efficiency savings expected on Research Council grants already active. The levying of top slices to this set of grants will continue each year for the Spending Review period as many of these current grants will continue running for several years. The top slice will be invoiced on an annual basis every February based on actual grant funding paid to ROs on this set of grants – and as grants finish, this set of grants will reduce, and so too will the top-slice invoices.

How should HEIs account for/apply the top slice?
ROs have the flexibility to account for the top slice internally as they feel appropriate.

Is the top-slice data available on a grant by grant basis?
A break down of top-slice data on a grant by grant basis has been provided for the invoices that have already been issued and we will continue to do this for all future invoices.

Will the top-slice process be continuing indefinitely?
No. The use of top-slice invoices was introduced to apply to those grants that were already active in 2011. The intention is to move to a process of applying the efficiency savings at source in the grant awards themselves from April 2012, which means that these new grants will not require a top-slice invoice.

As the grants that were active in 2011 finish, the number of grants to which the top-slice has to be applied will also reduce over time.

Are the Research Councils able to offer any advice on the accounting for top slicing at Research Organisations (ROs)?
We have specifically been asked whether it is acceptable for this invoice to be treated as an eligible cost against the respective Research Council grant and to be included in the final expenditure statement.

We have concluded that it is an acceptable approach to charge to the relevant grant, as a Directly Incurred (DI) Other Cost, that portion of the indexation topslice attributable to DI costs and to include this in the FES. It is not acceptable to charge the non-DI portion of the indexation topslice to the grant. In determining the portion attributable to DI, it is acceptable to equate this to the value of DI (and Exceptions) costs as a proportion of total grant value. The following steps outline what will happen in practice. You may wish to account for the remainder of the top slicing as a reduction in the amount of funds received, but this is at your discretion.

RCUK invoice ROs for the top slice. Details of the derivation from individual grants will be made available.

ROs will process the invoice through their Accounts payable crediting the respective Research Council and Debiting the individual grant by the relevant amount, calculated in the way described above.

Research Councils will, in the normal way, fund the grant up to the value shown in the offer document plus any additional funding streams added while the grant is Active.

The reconciliation of the grant will, again in the normal way, be against the amount spent up to the value shown in the offer document plus any agreed additional costs such as sick pay, maternity/paternity pay etc and any additional funding streams added to the grant. As described above, the amount spent may include the relevant part of the indexation topslice. This should be shown under Exceptions – Other Costs (if present) so that the full amount can be recovered.

The net impact for the Research Councils is to pay the agreed funding and receive the top sliced amounts.

What is the distribution of ROs across the different efficiency groups?
The tables below shows the distribution (first by percentage, them by number) for those HEIs for which HEFCE provided indirect cost rate information. ROs which apply dispensation or for which no data is available are assigned by default to efficiency group C and are not included in the table.

  2012/13  2013/14  2014/15  2015/16 
A    18% 16% 16% 9%
25% 18% 16% 12%
16% 21% 20% 20%
24% 30% 36% 38%
18% 15% 18% 21%

 

  2012/13  2013/14  2014/15  2015/16 
A 23 21 11 11
B 32 23 19 14
C 21 27 24 23
D 31 39 43 44
E 23 20 21 25
Total  130 130 118 117

 

This data is shown graphically below:

Line chart detailing data above

 

There has been a shift towards more HEIs falling in the D & E groups as very few have succeeded in maintaining the required 2.5% annual reduction in indexed indirect cost rates over the period.

 

Efficiency Savings in Capital and Equipment Funding

Are RCUK doing anything to assist equipment sharing?
RCUK is currently working with university partners to develop options to promote and assist equipment sharing, including exploring the issues around asset registers.

What advice would RCUK give to researchers who may be put off applying for equipment on grants because of these new requirements?
The new requirements have been introduced as demand is expected to exceed capital budgets during the spending review period and so applicants are encouraged to minimise project dependency on capital funding. However all Councils will make best endeavours to meet capital requests in line with the RCUK guidance, subject to affordability within capital budgets and as always the greatest emphasis, for all Councils, is placed on research excellence throughout the peer review process.

How are RC’s taking into account indirect savings already made by the sector?
RCUK recognises and appreciates the efforts already being made by the sector to drive efficiency in their research operations. Improvements in the efficiency of the sector can be counted by RCUK against the overall targets that have been set.

This will reduce the extent that these targets need to be met through levying further efficiency savings on Research Council grants. In addition, through the allocation of ROs to efficiency groups, RCUK will seek to recognise fairly and reward ROs which have been able to demonstrate sector-leading reductions in their indirect cost rates.

What happens after 2015?
The budget allocations for RCUK identified target efficiency savings for the spending review period 2011/12 to 2014/15. It is anticipated that funding constraints will continue beyond 2014/15, but at this stage it is too soon to be able provide any details.

Will RCUK meet the savings targets? What will happen if they fall short of the target?
RCUK will report the efficiency savings being made annually to BEIS in May each year. Interim figures for savings made to date give us reason to believe that we will achieve the first year’s target. If there is a shortfall against the target for year one this will need to be made up over the remainder of the period, and if necessary higher efficiency rates applied to Research Council grants.

Is RCUK committed to the principle of fEC?
Yes. RCUK remains absolutely committed to the principle of funding grants at 80% FEC. The efficiency savings programme is based on the principle of driving efficiency in the institutional indirect costs of research activity, as well as through pay-restraint for the salaries costed onto grants. The savings being made in this way are being re-invested in funding further research

Where is further guidance available?
Further guidance is available on the RCUK website here.

Is RCUK planning to introduce any further savings e.g. on estates or on training grants?
RCUK is not currently planning to introduce any further savings reductions to other cost headings (including estates) or grant types; however, this will be kept under review, depending on the ability of RCUK to meet its targets through the levying of efficiency savings on research grants and institutes.

How is RCUK working with other bodies to align its activity in this area?
HEFCE has been represented on the RCUK Wakeham Implementation Group in order to ensure alignment across RCUK and the funding councils in the establishment of the Wakeham efficiency programme.

RCUK has also been listening to the RCUK Research Organisation Consultation Group (ROCG) and the TRAC development group (TDG) at regular intervals. We also sought feedback in 2011 from a number of key stakeholders including the Russell Group, 1994 Group and UUK.

In addition other Government departments have been requested to adopt a similar approach for efficiency savings against their research funding and the Research Councils have received a request to share with these departments the Efficiency Groups to which Research Organisations have been assigned. We have agreed that this information will be made available on the understanding that it is treated confidentially and will not be made publicly available.

Does RCUK plan to apply savings retrospectively?
No, the efficiency savings programme came into effect in April 2011 and only effects funding after that date.

How is this money being reinvested?
All of the funds saved will be reinvested in science and research.


Freedom of Information | Cookies and Privacy | Terms and Conditions | © Research Councils UK 2014