A Guide to Understanding Research (HERDC) Income
1.0
Introduction
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/HigherEducationRese
archDataCollection.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.
2.0
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:
http://www.innovation.gov.au/Research/ResearchBlockGrants/Pages/AustralianCompetitive
GrantsRegister.aspx
Document11
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.
AUSTRALIAN




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:



3.0
International A: Competitive, peer-reviewed research grant income from overseas
agencies
International B: Other international income
International C: HDR Fees for international students.
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:
Document12



4.0
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
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 SpecificationsNet 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.
Document13
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.
Document14
5.0
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:
1.
2.
3.
4.
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.
5.1
Definition of Research
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
[email protected]
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
Intellectual Property.
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 protected]
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.
Document15
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/HERDCR
esearchIncomeFlowChart.pdf)
Document16