1. The New RASCAL Model Resource Allocation System and Cost Apportionment at Loughborough (RASCAL) 25 April 2012

2. Why RASCAL The majority of the University’s income comes from the core activities of teaching and research, including short courses and consultancy. These are carried out in the 10 Schools of the University at departmental level. At a University level there is also income from the Residential and Catering operations. The surpluses from these operations add to the funding available to the University. Support Services such as Facilities Management, IT Services, Student Services, Human Resources, etc are all essential costs of the University which enable it to function but are not self-financing. These departments are given an allocated budget from the University with which to deliver the required level of service to the University. The difference between the total income for the University and the total expenditure of the University is the surplus (or deficit). As the required surplus is set at 3% of turnover it can be regarded as another “cost” to the University. RASCAL attempts to allocate income to the departments generating the income and charges them with the directly attributable costs of the department plus a fair share of the total costs of the University, including the required 3% surplus. The net result of income minus directly attributable costs minus apportioned costs is the surplus or deficit of the department/School. The way RASCAL is constructed means that as long as each department/School meets its budget, whether surplus or deficit, the University will balance its budget and deliver the required surplus

3. Allocation of Income IncomeAllocation TeachingThis comprises HEFCE teaching grant and fee income. It is amalgamated into a single “pot” and distributed to departments on the basis of student load. Account is taken of the band the department’s student is in, and weighted as per Hefce formulae. Before distribution deductions are made to provide for special purposes such as providing for DVC’s and, research schools. Research, grants & contracts Relates to qualitative research (QR) and funds for the supervision of home students. It is passed on in the same way that it is received and driven by the unit of assessments members of staff were returned to; i.e. can be traced directly to departments and allocated as such. It provides departments with some degree of flexibility in controlling the department’s finances. Other services renderedAllocated as earned Short & self-financing courses Allocated as earned Other incomeAllocated as earned

4. The need for change A New Funding Regime Under the current funding regime HEFCE categorise subjects into 4 bands and funds students according to the band they are in. The intention was to try to allocate funding according to the cost of delivering the subject. The bands, going from A to D, were weighted 4.0/1.7/1.3/1.0. Under the new fee regime only bands A and B are going to be funded. Band B will be getting £1,483 from HEFCE. As the University is going to charge £9,000 fees, the income for the bands will be £10,483, £9,000 and £9,000 for bands B, C and D respectively. There is no longer any connection to the cost of delivering a subject.

5. An Opportunity This was a chance for the University to look again at the RASCAL Model, assess its suitability for purpose and consider ways to Improve it. Some of the problems identified with RASCAL were: Departments understanding of the meaning of surplus/deficit. What are the consequences if any of coming in over or under budget and if so do the departments understand these? Motivational factors –Does the model encourage space savings? –Does the model encourage cost savings or budget padding? It does not relate teaching experience to the financial position of a department How can the widening participation agenda be built in fairly?

6. Competition between departments for “strategic funding” rather than taking into account the all expenditure in the department. Non-equitability of weighting factors for COMA such as: Drivers for space - studio space 50% discount Teaching cost weightings - for overseas students 1.2 and PGCE 0.5 Load weightings - some students receive an extra 10% load Staff driver only includes academic and academic related staff not administrative or technical staff.

7. Principles adopted for new model The University decided to adopt the following principles An income streamed model should be maintained Where possible income should be distributed gross A cross subsidy should be imposed to reflect the cost of teaching in different subject areas but this should be transparent Three models considered for cross subsidy were: 1. TRAC T national (average teaching costs across the sector) 2. HEFCE income stream (1.7,1.3.1.0) 3. TRAC T group A (Russell Group) The model for cross subsidy chosen was model 1 as this model will keep pace with the competitive environment and it is also data that HEFCE uses.

8. A chance for simplification RASCAL POT In order to move to a more transparent income streaming model it was felt that certain deductions from the RASCAL Pot should no longer be made and should instead form part of the Indirect (COMA) charge or be charged /credited straight to the departments. These are listed below: Special Initiatives, CETL continuation and special factors – to become part of the new “Indirect charge”. Development funding for studentships, strategic funding for pay and strategic funding for non pay – cost/credit to fall to departments. Items of expenditure that are decided at University level and so cannot be determined by Schools, such as bursaries, will still be deducted from the Pot. A consequence of this decision is that the gross income allocated to Schools will be higher than in the past.

9. RASCAL POTAppendix 1 Budget Suggested Amendment 2012/13 ££££ Basic Teaching Grant Total HEFCE Funding31,778,000 HEFCE Funding for Band B only0 0 Vulnerable subjects - allocate below-647,008 31,130,992 AddWidening Participation1,529,000 Less Special Initiatives-657,119871,88101,529,000 AddFees35,808,000 Additional Fees16,538,000 less BURSARIES-4,398,000 less Development Funding Studentships-1,599,419 0 less Strategic Funding-769,237 0 less CETL Continuation-270,000 0 less LUSAD FE Home fees-12,748 less TTA fees-240,768 less Premium Fees-85,000 0 less PG(Supervision) fees-2,186,065 42,784,763 45,508,419 LessSpecial Factors Academic Depts-819,765 0 Central Depts ( exc Grad Sch )-106,437 0 add TTA factors0 0 -926,202 0 Total Home Teaching Pot 73,861,434 78,168,411

10. INDIRECT CHARGES Cost of support service sections have in the past been apportioned on five principal drivers but in future it will be based only on two drivers, space and people (people being student load including PGR’s and all staff FTE’s). The term COMA charge is to be replaced by “Indirect Charges” in future and will include the Community Charge. This decision was arrived at after a great deal of thought about various options and modelling of numbers from those scenarios as shown in the following table. It is still a basic premise that the charge is based on perceived usage of University resources NOT a reflection of income in the School.

12. Consequences Income allocated to the Schools will be a larger absolute amount. Indirect charges will be a larger absolute amount. Ignoring the cross subsidy, Schools with greater numbers of band D students will be better off. The cross subsidy is designed to rebalance this. The effect will be gradual as new regime students replace old regime ones over the next three years. 2015/16 will be steady state. The new layout of the Business Plans is shown below:

13. RASCAL - BUSINESS PLANNING School of Theoretical Studies 2012/13Bus plan2012/13Bus plan New Funding Model TRAC Nat T StudentAllocationStudentAllocation Load£ £ Home Teaching Total1,591.228,986,5181,591.228,449,009 Overseas Teaching Total663.479,336,086663.479,336,086 Other Adjustments 36,499 TOTAL TEACHING ALLOCATION 18,359,103 17,821,594 TOTAL RESEARCH ALLOCATION 1,850,234 Salary Allocation 0 0 Strategic Funding Non-Pay 0 0 Development Funding 0 0 TOTAL STRATEGIC ALLOCATION 0 0 TOTAL RASCAL ALLOCATION 20,209,337 19,671,828 Direct Expenditure 12,509,942 Discretionary 0 0 Research Grants & Contracts 98,597 Enterprise - Other Funded Projects 0 0 Enterprise - Short & Self Financing Courses 1,362,856 TOTAL DEPARTMENTAL INCOME 22,894,526 22,357,017 TOTAL DEPARTMENTAL EXPENDITURE 13,733,678 Income less Direct Expenditure 9,160,848 8,623,339 Indirect Charges7,996,596 Income less Total Expenditure 1,164,252 626,743 Cross Subsidy -537,509 Forecast Surplus/Deficit 626,743

14. 2011/122012/13 2015/16 Final Ops Approved Proposed Funding ModelCross subsidy School surplus/deficit Proposed Funding ModelCross subsidy School surplus/deficit SchoolJuly 2011 School of Aeronautical, Automotive, Chemical and Materials Engineering815,297205,378543,435748,813-752,319752,698379 School of Business and Economics3,666352,196-547,309-195,1133,122,980-1,530,2291,592,751 School of Civil and Building Engineering160,566501,52766,468567,995-91,038-58,760-149,798 Loughborough Design School685,203555,454366,306921,760237,895261,983499,878 School of Electronic, Electrical and Systems Engineering-62,891-378,557279,858-98,699-832,228461,569-370,659 Wolfson School of Mechanical and Manufacturing Engineering192,032101,969398,788500,757-647,167542,854-104,313 School of Science-582,795323,028302,774625,802-933,061900,888-32,172 School of Social, Political and Geographical Sciences-699,281872,177-1,224,164-351,987893,720-1,020,190-126,470 School of Sport, Exercise and Health Sciences456,526229,749-163,38066,369297,998-664,618-366,620 School of the Arts, English and Drama-1,093,887-2,762,922-22,775-2,785,697-1,296,780353,805-942,975 Research Schools0000000 Other-120,000-00 0 TOTAL UNIVERSITY-245,564-00 000