1. A new model for full cost analysis at Swedish universities Kåre Bremer Vice chancellor, Stockholm University and board member of The Association of Swedish Higher Education 22

2. Stakeholders Government and Ministry of Education Universities and their departments and projects The Association of Swedish Higher Education Research councils and other funding bodies The Minister of Education Rectors, department directors, scientists Directors of research councils etc. 21

3. Stakeholders’ opinions The Minister of Education: ”Now when you receive the major part of your resources from external sources you (rectors) must ensure that the full cost of any research project funded from external sources is covered from the same external sources.” (Government proposition 2000 and subsequently) 20

4. Stakeholders’ opinions Research council directors: ”We can accept 35% overhead for covering indirect costs inluding costs for localities. This should be enough for full cost coverage.” Private foundation directors: ”We do not pay any indirect costs except perhaps those that are directly related to the project. The university must cover all other indirect costs.” 19

5. Stakeholders’ opinions Scientists: ”I do not want part of my research grant to be used for covering indirect costs. They should be paid by the department or the university.” Department directors: ”If the external funding body does not provide sufficient overhead for indirect costs, the university should cover those, not the department.” 18

6. Stakeholders’ opinions Rectors: ”External funding has now become so large in relation to internal resources that it has become impossible to cover all indirect costs from internal sources.” 17

7. A new model Basic principles: All activities are divided into core activities and support activities. Core activities are divided into mainly education and mainly research activities and these in turn into distinct operations called cost-bearers, e.g. a research project or a particular course. 16

8. A new model Basic principles: The cost for all support activities (indirect costs) should be borne by the cost-bearers in relation to their size, estimated by the direct salary cost for the cost-bearer (e.g. the direct salary costs for those involved in a research project). 15

9. A new model Basic principles: The full cost for any activity (cost-bearer) comprises the direct costs for salaries, expenses (materials etc.), equipment and premises (localities) as well as the indirect costs for the support activities, i. e. the cost-bearer’s share of all support activities at the university. 14

10. A new model Basic principles: Indirect costs are calculated at three levels: Department Faculty (may be omitted for smaller universities) University 13

11. A new model Basic principles: The total indirect costs for any cost-bearer is the sum of its share of the indirect costs at the three levels of Department, Faculty, and University. For example, if the direct salary costs of a research project constitute 4% of the direct salary costs of all cost-bearers at the department, the project must bear 4% of the indirect costs at the department. 12

12. Examples of indirect costs Leader functions Education or research administration/support Finance and staff administration/support Infrastructure and service University library Other 11

13. Examples of indirect costs Full cost analysis of 23 projects in humanities at Uppsala, Lund and Stockholm universities Direct costs 824 000 SEK/year Indirect costs 429 000 SEK/year = 52% overhead (variation 31-66%) About equally distributed between the three levels Department, Faculty, University 10

14. Is there full cost coverage? No Full cost analysis of 23 projects in humanities at Uppsala, Lund and Stockholm universities Standard agreement 35% overhead incl. localities = 78% of total costs covered New agreement 24.2% overhead excl. localities = 82% of total costs covered 9

15. How are full costs covered? All resources, internal and external, are each year distributed to the departments The costs for all support activities at faculty and university level are calculated for the whole year and charged to each department The size of the ”bill” depends on the size of the department 8

16. How are full costs covered? The size of the ”bill” to each department for support activities depends on the size of the department At Stockholm University the bill for support activities at the university level is 17% of all salary costs at the department If the department increases its salary costs through a new externally funded research project, the bill increases with 17% of the increase in salary costs 7

17. How are full costs covered? In addition to the support activities at faculty and university level, paid by the ”bill”, there are also support acitivities at the department itself Each department must pay its bill and its own support activities from its own resources, received from internal and external sources incl. overhead 6

18. How are full costs covered? Department income Funding from the university Other internal department sources External sources, e.g. grants with overhead Department costs Direct costs for core activities Indirect costs for support activities 5

19. Next steps Full cost analysis in all project grant applications Specification of indirect costs and cost coverage, external and internal Future renewed discussions with external funding agencies regarding full cost coverage 4

20. Stakeholders’ future opinions Research council directors: ”We realize 35% overhead is not enough and accept to cover all indirect costs…” Private foundation directors: ”We accept the calculation of indirect costs and agree to cover most (or all) of them…” 3

21. Stakeholders’ future opinions Scientists: ”With full cost coverage, support for my project has become much better…” Department directors and rectors: ”With full cost coverage, the department and the university has been able to support new projects…” 2

22. Potential barriers Incomplete understanding of the new model Incomplete understanding of indirect costs Difficulties in transforming economic systems Difficulties in introducing the new model Remaining pressure from external funding bodies for universities to cover indirect costs 1

23. Conclusion The new model is currently under introduction Hopefully it will lead to understanding of and agreement on indirect costs for projects and other core activities Hopefully it will increase cost coverage and perhaps even lead to full cost coverage of projects and other core activities from funding sources external 0