C10031 Introduction

 
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HESA FSR with HE-BCI Survey collection 2010/11

Introduction

Version 1.1 Produced 2011-09-01

Purpose of the Finance Statistics Return (FSR)

1. The annual Finance Statistics Return (FSR) is the main source of historical financial information on the total activities of all UK higher education institutions (HEIs). The data supplied within the return are required for the following reasons:

  • To assist in the production of management information.
  • To assist in the monitoring of the financial health of institutions.
  • To support policy formulation and decisions.
  • To support proper reporting and accountability.
  • To inform and report on the funding process.
  • To advise the Office for National Statistics on the overseas earnings of HEIs for use in the calculation of the Balance of Payments.

The UK funding councils intend to use data on research income within the Research Excellence Framework (REF). In particular income from charities will be disaggregated according to whether or not it was gained through an 'open competitive process'. It is therefore important that income is split between that earned through 'open competitive process' and 'other income'.

Based on these uses, it is important that the return should be completed as consistently as possible between one institution and another and between successive years.

2. In addition to the reasons listed above, HEFCE will be using research income from charities collected in the HESA FSR to inform the charity support element of its quality-related research (QR) allocations. HEFCE intends to use the 2009/10 and 2010/11 HESA FSR data to inform the charity support allocations for 2012/13. HEFCE are no longer collecting data through the Research Activity Survey.

3. HEFCE also uses data on research income from UK industry, research income from EU industry, plus research income from non-EU industry collected in the HESA FSR to inform the business element of its quality-related QR allocations.

Purpose of the Higher Education - Business and Community (HE-BCI) Survey

4. The HE-BCI Survey is the main vehicle for measuring the volume and direction of interactions between UK HEIs and business and the wider community. The survey has collected data for each academic year from 1999/2000. Although hitherto collected by HEFCE, HESA and HEFCE have concluded that the most appropriate way forward is to link the HE-BCI Survey to the HESA FSR, with the two to be returned to HESA together.

The HE-BCI survey collects information regarding the whole HEI rather than any constituent team or function. There may be numerous examples of HEIs with one department engaging with international partners in research projects while another is embedded in regional economic development; in such circumstance it is expected that the respondent provides the most useful summary within the format of the HE-BCI survey.

5. Part A of the HE-BCI survey is designed to collect information on the infrastructure, capacity and strategy of HEIs. Data here are less likely to be considered as potential funding metrics but do provide invaluable information (at the institutional as well as regional and national levels) for HEIs and policy makers alike. Overall it is expected that the senior staff responsible for third stream activity would provide informative responses under Part A.

6. Part B of the HE-BCI Survey is primarily concerned with gathering numeric and financial data regarding third stream activity. While any low-burden questionnaire is likely not to capture everything given the complexity of such interactions, the majority of an HEI's third stream income should be reflected under HE-BCI.

It is important for the survey to distinguish between types of partner (such as SMEs and non-commercial organisations) to allow for the understanding that there may be a number of indirect economic benefits brought about by these interactions that may be additional to those provided to larger commercial business. For example, Continuing Professional Development (CPD) for nurses may be delivered to either public or private health providers although the former is likely to be seen as having a wider social impact.

The data supplied within the return are required for the following reasons:

a. To assist in the production of third stream activity information.

b. To assist in the production of management information.

c. To support policy development.

d. To provide metrics to drive the allocation of public funds.

e. To further develop HEIs' infrastructure in this area.

7. Funding bodies in most of the UK already draw on HE-BCI Survey data to inform funding of Knowledge Transfer and this remains one of the key drivers for collection of the information. In addition, a range of other public and project funders such as HM Treasury, BIS and the Resarch Councils use the HE-BCI Survey to produce key performance indicators and also for monitoring and international benchmarking between Europe and North America. Whilst it is recognised that arrangements in Scotland are different (where currently a dedicated data return exists and is used to drive similar Knowledge Transfer formulaic funding), because of the usefulness of benchmarking the majority of HEIs in Scotland have previously submitted the HE-BCI Survey. Return of HE-BCI data is a condition of grant in 2011/12 for the Knowledge Transfer Grant.

It is therefore important that the return should be completed as consistently as possible between one institution and another and between successive years.

Scope of the FSR

8. The FSR provides details of the consolidated income and expenditure account, statement of recognised gains and losses, consolidated balance sheet and consolidated cash flow statement. The figures recorded in the FSR must be the same as those recorded in the audited/published financial statements.

Scope of the HE-BCI Survey

9. The HE-BCI Survey covers a range of activities: from the commercialism of new knowledge, through to the delivery of professional training, consultancy and services, to activities intended to have direct social benefits. ‘Business' in this context refers to both public and private sector partners of all sizes and sectors, with which higher education institutions have interactions.

Accounting conventions for the FSR

10. All HEIs should prepare their annual financial statements in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education Institutions (SORP), and comply with the financial reporting requirements contained in any UK legislation relevant to their constitution, such as the Companies Act and the Charities Act. The FSR uses the principles in the SORP to analyse the financial statements in greater detail than is required for published financial statements.

11. These notes of guidance reflect the SORP in agreement with BUFDG. In particular, the definition of terms and the explanatory notes should be applied in completing the return. The principles of the SORP relating to the financial statements apply equally to the completion of the FSR. In addition, conventions relating to discontinued/acquired operations, research grants and contracts, other services rendered and cost centres are set out and should also be followed by institutions in preparing their FSRs.

12. FSR Tables 1-4 reflect the SORP published in October 2007. Minor changes will be made to these tables as necessary over time to reflect changes to the FE/HE SORP.

13. The SORP (October 2007) can be downloaded (.pdf file) from: http://www.universitiesuk.ac.uk/Publications/Documents/SORP_2007.pdf.


Conventions to be used in the FSR

Discontinued/acquired operations

14. Discontinued or acquired operations, for which separate disclosure is required on the face of the income and expenditure account under Financial Reporting Standards (FRS) 3 {Reporting Financial Performance} in the audited financial statements, should not be disclosed separately in the FSR. The individual elements of income and expenditure relating to such operations should be included under the relevant individual Heads within the FSR.

Full economic costing (fEC)

15. The implementation of full economic costing (fEC) should not have any impact on the way in which institutions account for research income in their financial statements. fEC is a methodology by which a price is calculated and the only result is that the price, and hence income, should increase: the category of income remains the same, i.e. research grants and contracts. The costs of institutions' activities remain as they would otherwise have been. On the face of the income and expenditure account the categories of staff costs, other operating expenses, depreciation and interest payable remain the same; for those institutions that have disclosed the direct costs of research in the notes to the accounts, the same treatment is also appropriate.

Conventions relating to research grants and contracts and other services rendered

16. Research is to include research and experimental development. The definition of research, below, is taken from the 2002 Frascati Manual (ISBN 9264199039 - available from OECD via http://new.sourceoecd.org):

"Research and experimental development (R&D) comprise creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications.

The term R&D covers three activities: basic research, applied research and experimental development."

17. Basic research is experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundation of phenomena and observable facts, without any particular application or use in view. Applied research is also original investigation undertaken in order to acquire new knowledge. It is, however, directed primarily towards a specific practical aim or objective. Experimental development is systematic work, drawing on existing knowledge gained from research and/or practical experience, which is directed to producing new materials, products or devices, to installing new processes, systems and services, or to improving substantially those already produced or installed. R&D covers both formal R&D in R&D units and informal or occasional R&D in other units.

18. The Frascati Manual lists situations where certain activities are to be excluded from R&D except when carried out solely or primarily for the purposes of an R&D project. These include: routine testing and analysis of materials, components, products, processes, etc; feasibility studies; routine software development; general purpose data collection. The later stages of some clinical drug trials may be more akin to routine testing, particularly in cases where the original research has been done by a drug company or other contractor.

19. The Frascati Manual contains the following examples of the type of work included under the three components of R&D:

  • The determination of the amino acid sequence of an antibody molecule would be basic research. Investigations undertaken in an effort to distinguish between antibodies for various diseases would be applied research. Experimental development would then consist of devising a method for synthesising the antibody for a particular disease on the basis of knowledge of its structure and clinically testing the effectiveness of the synthesised antibody on patients who have agreed to accept experimental advanced treatment.
  • Theoretical investigation of the factors determining regional variations in economic growth is basic research; however, such investigation performed for the purpose of developing government policy would be applied research. The development of operational models, based upon laws revealed through research and aimed at modifying regional disparities, would be experimental development.

20. In some cases the classification between 'research grants and contracts' and 'other services rendered' may be borderline. In such situations, the Frascati Manual should be referred to in order to determine the correct classification.

21. In Table 7 of the FSR, expenditure on Head 7 (Research grants and contracts) and Head 8 (Other expenditure) should consist of direct costs which are incurred and should be the same as that recorded in the financial statements.

Cost centres

22. Tables 5a, 5b and 7 break down income and expenditure by cost centre. A cost centre, as used for FSR purposes, represents a group of operations having similar characteristics and broadly similar patterns of costs. Institutions allocate departments to cost centres or split departments across cost centres in consultation with the Funding Councils. Expenditure relating to administration and central services, such as libraries and computer centres, should be shown under academic services, whereas expenditure relating to units (such as animal houses or engineering workshops) servicing particular academic departments should normally be included under the associated academic cost centre. Central services have their own cost centre codes under Total Academic Services and Central administration and services. For example, where telephone costs are charged to departments they should be included in academic departmental expenditure under the appropriate cost centre. Postage costs should be similarly treated to the extent that the expenditure is charged to the academic department. The cost centre codes are the main references in the computerised record of recurrent expenditure. They are also included in the HESA Student and Staff returns and, therefore, provide the main link between the FSR and these other returns.

Uniformity of returns

23. It is imperative that the FSR is completed uniformly, and so all institutions should follow the notes of guidance provided. This will then allow the data to be compiled in a consistent manner and for meaningful interpretations of the data to be made. All monies should be shown in units of £1,000 and where necessary be independently rounded to the nearest £1,000. For example, £147,700 should be entered as 148.

The ordering and linking of the tables

24. Table 1 (Consolidated income and expenditure account), Table 2 (Statement of recognised gains and losses), the main heads of Table 3 (Consolidated balance sheet) and Table 4 (Consolidated cash flow statement) must be identical to the financial statements.

25. Tables 5a (Research grants and contracts - breakdown of income by BIS Research Councils, Royal Society and British Academy) and 5b (Research grants and contracts - breakdown of income by cost centre), and Table 6a (Tuition fees and education contracts analysed by domicile, mode, level and source) should be completed before Table 6b (Income analysed by source) as the totals from Tables 5a, 5b and 6a are automatically entered into Table 6b. Totals from Table 6b and Table 7 (Expenditure by activity) are automatically entered into Table 1.

26. The suggested order for completion of the tables is:
Table 5a, Table 5b, Table 6a, Table 6b, Table 7, Table 1, Table 2, Table 3, Table 4 and Table 8.

27. There is a number of validation checks embedded in the template. In addition to these there are a number of other checks that will be undertaken as part of the verification and validation procedure. The details of these additional checks will be listed in the pre-collection circular for the Finance Statistics Return with Higher Education - Business and Community Interaction Survey (FSR with HE-BCI Survey).

Audit

28. The data returned are subject to audit but do not require an Audit Statement.

Date of return

29. Institutions should submit the return with the completed tables to HESA by 15 December (this date still to be confirmed for institutions in Scotland).


Conventions to be used in the HE-BCI Survey

Uniformity of returns

30. It is imperative that the HE-BCI Survey is completed uniformly, and so all institutions should follow the Notes of guidance provided. This will then allow the data to be compiled in a consistent manner and for meaningful interpretations of the data to be made. All monies should be shown in units of £1,000 and where necessary be independently rounded to the nearest £1,000. For example, £147,700 should be entered as 148.

Audit

31. It is likely that any audit carried out on the HE-BCI Survey data will be concerned with headline KT income figures; for example HEIs should be confident of the total income from knowledge-related business interactions with the majority of data returned under appropriate headings even if it is not possible in a small minority of cases to draw exact distinctions between categories such as consultancy and facilities and equipment-related services.

In order to achieve a balance between data needs for HEIs and funding bodies, HE-BCI Survey guidance allows for a certain degree of expert estimation in certain parts of the return, namely where totals are to be disaggregated into subcategories. Where such estimation takes place, HEIs are required to keep records of the details and it is expected that they will be able to make provision for these data within their data capturing systems once embedded as part of the FSR. However, that data from the HE-BCI Survey that is used to inform funding is likely to be included alongside other data as part of the general funding data audits; this is already happening in Wales.

Date of return

32. Institutions should submit the return with the completed tables to HESA by 15 December each year.

General guidance for the HE-BCI Survey. For the HE-BCI Survey (Tables 1 to 5) it is income rather than fEC which should be returned.

33. Data should not be returned more than once in Tables 1 to 5, except for the specific sub-set of questions regarding regional partners and overseas interactions. Financial data should always be returned as reported in the institution's audited accounts.

34. Information is requested to be provided at the level of SME (including sole-traders and micro business), Other (non-SME) commercial businesses and Non-commercial (including public sector, not-for-profit and charities). Data are also required to be reported by Regional Development Agency (RDA) region and Overseas.

SMEs are classified as enterprises which:

  • employ fewer than 250 employees worldwide (including partners and executive directors), and
  • has either an annual turnover not exceeding 50m euros, or an annual balance sheet total not exceeding 43m euros, and  
  • conforms to the following independence criteria:

An enterprise is considered independent unless 25% or more of the capital or of the voting rights is owned by an enterprise falling outside the definition of an SME whichever may apply, or jointly by several such enterprises. (This ceiling may be exceeded if the enterprise is held by public investment corporations, venture capital companies or institutional investors, provided no control is exercised either individually or jointly, or if the capital is spread in such a way that it is not possible to determine by whom it is held). 

SMEs include micro, small and medium enterprises, and sole traders. See http://ec.europa.eu/enterprise/enterprise_policy/sme_definition/index_en.htm for the full definition.

Non-commercial businesses include the public sector, not-for-profit organisations and charities.

35. Where it is impractical to retrospectively analyse all partners by type, HEIs are encouraged to take samples and scale for the return. Where data may be auditable, the focus will be on institutions having robust and valid processes (such as sign-off by Director of Finance or similar) to return such figures rather than providing detailed evidence regarding each and every partner.

36. For the purposes of the HE-BCI Survey section of the return, research is defined as ‘original investigation undertaken in order to gain knowledge and understanding'. This definition excludes routine testing and analysis and the development of teaching materials that do not embody original research.