Managing the Overhead Costs for Research in a University

Research funding is once again under the microscope by the Federal Government. Combined with the recent budget statements the Government has also commissioned research through DIISR to review the management of overhead costs incurred by Universities in their quest to sponsor and conduct research.

The Allen Report

DIISR commissioned a report by Allen Consultants. (http://www.innovation.gov.au/ScienceAndResearch/policy/research_training/Pages/fullcostuniversityresearch.aspx). This report was the first stage in examining ways to address the issue of overhead costs incurred by the conduct of research by a University.

Currently there is a shortfall of 40%-70% of the research funds to meet these overheads according to the report.

The Allen report proposes a fixed figure of 50% to meet this shortfall or that universities invest in configuring an ABC model to more accurately and transparently show the true overhead costs.

The final report will be released later this year and while this is no attempt to pre-empt the final version Universities need to start addressing this issue as soon as possible.

The 09/10 Federal Budget

In addition to the Allen Report the recent budget handed down by the federal government, research funds (80%) are linked to universities having an ABC model. The statement at http://www.budget.gov.au/2009-10/content/bp2/html/bp2_expense-20.htm links research funds directly to universities having an ABC model. This is stated as follows:

“In addition to the extra funding, there will be changes to the way in which the funding allocations to universities are calculated. Funding will be allocated on the basis of negotiated funding agreements as follows: 20 per cent on the basis of a university's relative success in attracting research income (the current means of determining all of the RIBG funding); and 80 per cent contingent on universities undertaking activity based costing of the indirect costs of research and meeting performance targets which are to be developed and agreed during 2009‑10.”

Issue Clarification

While clarification of the Federal Government’s intention through DIISR is needed, organisations, should in the interim consider configuring an ABC model. ABM Technologies Australia Pty Ltd has been involved in the configuration of ABC models in Australia and overseas for over 10 years including the configuration of 3 extensive models with Australian universities.

We can assist you with our specialised tools and techniques to meet any future requirements in managing overhead costs as well as understand your current position in relation to these costs.