A Guide to Understanding Research (HERDC) Income
Each year Australian universities must submit a return to the Australian Government Department of Innovation, Industry, Science and Research called the Higher Education Research Data Collection (HERDC). The Higher Education Research Data Collection includes both publication and research income data with the return having detailed guidelines that are revised annually – available at the following URL: (http://www.innovation.gov.au/Research/ResearchBlockGrants/Pages/HigherEducationResearchDataCollection.aspx)
Data gathered via the HERDC process is used, together the with student data collection, to assess the performance of Australian universities’ research performance. This, in turn, determines the share of ACU’s share of Research Block Grant funding. The general purpose of Research Block Grant funding is to support the indirect costs of universities associated with conducting research activity.
Research Income Categories
Research income must satisfy the general criteria of being classified as research in accordance with the HERDC guidelines before meeting other rules for inclusion.
Research income has four broad categories with several of these having sub-categories. The four categories of research income are-
Category 1: Australian competitive grants;
Category 2: Other public sector research income;
Category 3: Industry and other research income;
Category 4: Cooperative Research Centre (CRC) research income.
It is important for ACU researchers to understand the difference between these Category types as we seek to increase our share of Category 1 income.
Category 1 comprises grant funding schemes/funding agencies that are listed on the Australian Competitive Grants Register (ACGR) that is revised annually and includes agencies such as the Australian Research Council, National Health and Medical Research Council, Commonwealth Department of Families, Community Services and Indigenous Affairs (e.g. Homelessness Research Partnerships Agreements). The ACGR can be accessed at the Department’s website:
Category 2 comprises any other income received from state or territory government departments or agencies, whether via programs, grants or contracts. It also includes local government grant or contract income.
Category 3 is for funding received from other (non Category 1 and 2) organisations and businesses, etc and has a number of sub-categories.
Contracts which relate to a specified research activity generally developed and commissioned by a non Category 1 or 2 agency, for example professional organisations such as an accreditation board, a sports organisation, a public company. This research would generally have deliverables, milestones and outcomes tied to funding and determined by the sponsor.
Grants describe the research which is developed primarily by the ACU investigator. For example industry funding in support of ARC Linkage projects, untied industry funds to support a research position. The researcher has more control over the direction, reporting and the outcomes of this activity, compared to a contract.
Donations, bequests and foundations from Australian business, the not for profit sector, or individuals for the conduct of research.
HDR fees for domestic students.
International A: Competitive, peer-reviewed research grant income from overseas agencies
International B: Other international income
International C: HDR Fees for international students.
3.0 Research income – what counts and what does not?
The HERDC Specifications detail at length what can and what cannot be included. Page 16 of the 2012 HERDC Specifications includes a list of what can and cannot be included but even the examples in the HERDC Specifications are not exhaustive.
Some examples of research income that CAN be included in our HERDC annual return are:
the employment of staff and purchase of technical and other equipment needed to conduct the research
funds provided for the conduct of clinical trials provided the purpose of the trial meets the definition of research
travel grants where the funds are used for travel relating directly to a program of research
the development of HDR training and courses
income from overseas HEPs (i.e. universities) provided specifically for the conduct of research
Some examples of income that is not classified as research and that CANNOT be included in the HERDC annual return are:
funds provided specifically for the purpose of hosting, organising or travel to and attending a conference, workshop or meeting unless funds are specifically for enabling access to a program of research
funds provided specifically for the purpose of producing research publications (that is, for publishing research rather than conducting it)
consultancy fees for projects that do not meet the definition of research
4.0 Reporting University Research Income
When the university reports on its research income, we must report “net receipted income”. A definition of net receipted income is at page 7, 2012 HERDC Specifications-
Net receipted income is the amount of research income a HEP (or subsidiary) retains in its accounting system after shared research income (section 1.3.14) has been divided and/or third party income (section 1.3.15) has been expended and/or distributed and is verified in its audited financial statements.
4.1 Reporting Category 1 (ARC/NHMRC) Grants
Where the University receives grant income from the ARC or NHMRC as a lead institution, and passes some of that income to another institution for the purpose of the agreed research (and this would be done within the terms of a collaborative or multi-institutional agreement), then ACU can only count the net receipted income held by the University, as outlined above.
If ACU is a collaborating university on an ARC or NHMRC grant and receives funding from another Australian university/research institute for research, then ACU can count this income in our HERDC Research Income return, as long as no double counting occurs.
For a Category 1 NHMRC grant administered by ACU, an example of what can be claimed is as follows.
Funds received from NHMRC for the duration of the project: $300,000
Funds transferred to collaborating university A for the duration of the project: $50,000
Funds transferred to collaborating university B for the duration of the project: $100,000
ACU must enter in to an agreement with each collaborating university detailing the amounts to be shared during the life of the grant. In this case, $50,000 will transfer to University A and $100,000 to University B. In this example, ACU can only count net receipted income of $150,000. Only one University can claim HERDC funds for the exact same activity – no double counting is allowed.
HEPs must exclude research income which is subject to cost reimbursement arrangements with affiliates or partner organisations (i.e. reimbursement of research costs, including salaries) which are not explicitly covered within a formal legal relationship between the HEP and external organisation.
4.2 Reporting Other Research Income
When ACU receives other income from say Category 2 or 3, in order to include income in the HERDC report, the Department and ACU requires a formal documented agreement to be in place.
For research between ACU and an external agency (State Government Department, University, other agency, etc), the agreement must cover basic contract requirements including an outline of the research to be undertaken, payment terms, milestones, intellectual property, and any student related matters. Category 2 research income tends to be more straightforward, compared to Category 3, but it is important to be aware that only income for the specific research component of the work can be included. For example, indirect costs may not be included, and non research costs (see definition of research) may not be included.
Where ACU has an existing MOU or other broader collaboration agreement, it is likewise important that these basic contract requirements are met for individual projects.
Category 3 Example
For this research, ACU has an existing collaboration agreement with a hospital whereby staff costs are shared, and the University is the primary funding recipient of the grant. ACU requires the services of technical and nursing staff in a hospital to recruit volunteers and perform pathology services. The hospital and technical staff remain employees of the hospital and the hospital invoices ACU for labour and laboratory consumables, that is, for goods and services.
ACU: receives $200,000 from overseas funding agency, then agrees via a contract with an Australian hospital, to supply goods and services worth $100,000.
In this example, the 2012 HERDC guidelines provide for third party income to be counted in very limited circumstances such as
where the third party is a subsidiary of the HEP (i.e. university) and the research income is retained in the HEP’s accounting system and verified in its audited financial statements; or
where a HEP has made payments to a third party for goods and services in support of the conduct of research under the control of the HEP, and there is an auditable agreement. The provider of the goods and services would generally be treated as a contractor to ACU.
ACU is able to count all of this income if the above requirements are satisfied. The $100,000 of hospital funds will count as third party income but can be included because the research is under the control of ACU. The hospital invoices ACU for the specified components and the ACU payment is considered as a payment for goods and services and there is an agreement to supply these services.
ACU can also count the costs remitted by the Hospital to cover the ACU salary components if an agreements is in place which cover key requirements.
The Department specifies a number of requirements in order for research income to be considered HERDC eligible such that ACU can receive annual block grant funding from the Commonwealth. The key ones are as follows:
The activity must meet the definition of research, and
An overarching agreement must be in place, and
The income must be recognised and retained in the ACU financial system, ,and
Income must be classified into categories.
ACU is required to supply an annual Special Purpose Audit Report (ASA800) which certifies that the research income is correctly recorded, and specifically that items 1, 3 and 4 above are compliant with the HERDC specifications.
The definition of research is outlined in the HERDC specification and is on the ACU website at: http://www.acu.edu.au/about_acu/research.The definition covers all research and research training activities at ACU. Any questions as to whether a particular activity meets the definition of research should be directed to firstname.lastname@example.org
5.2 The Research Agreement
In its 2011 presentation to the sector, the Department specified that the agreement must include information about:
Grants fund administration and control
Employment, appointments, salary support
HDR research training
While ACU has a number of agreements in place to cover existing arrangements, compliance with the HERDC eligibility of research income, may require that existing agreements be supplemented with additional information. Researchers should ensure that Research Services has copies of current agreements, so that work on necessary supplementation can commence. An audit of existing agreements is underway and any questions about this audit can be directed to email@example.com
ACU must be able to verify the existence of funding agreements, MOUs, letters of agreement, contract, etc and these documents must be held for a minimum of three years. The Department advises that all agreements and contracts must be up to date, and reflect the research activity being undertaken (see section 4.3 of the HERDC specifications). Agreements made by email only (without supporting documentation) are not accepted as appropriate verification material.
5.3 Research Income and Non Compliance
It is not possible to include research income which has been just transferred, or recycled from a collaborator into the ACU accounts.
The following is an example of a circumstance where is it NOT possible to claim research income.
NSM is a hospital which is the administering institution of a research grant which meets the definition of research. ACU has an agreement in place with NSM which provides for a sharing of staff employment costs. An ACU staff member co-funded by the hospital is directing this research activity and wishes to transfer all or part of the grant to ACU. The researcher invoices ACU for the full grant amount believing that this will enable ACU to count the income for HERDC purposes.
In this case, ACU will not be able to claim these costs in its HERDC return because ACU is not the administering institution, and the income is not retained in the ACU finance system.
If NSM transferred $50,000 to ACU and then invoiced ACU for the same amount at a later date, the University would still report a zero amount in the HERDC income return. This because the arrangement still fails to satisfy a key requirement (see Section 5.0), that
The income must be recognised and retained in the ACU financial system.,
However, if the hospital contracted ACU to undertake the research and ACU established an agreement in support of this, and a G code to financially manage the research, then it would be possible to claim the amount transferred to ACU in the HERDC return. This arrangement would satisfy the above key requirement as it is clearly and transparently a research contract arrangement with ACU controlling the research activity. In this case we CAN claim the income.
5.4 Income Classification
HERDC income reported to the Department must conform to the specifications outlined in Section 2.0 above. The Department also says that ACU is to manage its own processes for categorising research income correctly. Faculties and departments have a role in working with Research Services to ensure that the ACU income categorisation is correct.
The Department has devised a flow chart which illustrates this treatment of income - http://www.innovation.gov.au/Research/ResearchBlockGrants/Documents/HERDCResearchIncomeFlowChart.pdf)