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Research Income - Activities that can and cannot be counted as research income

Research income, Definition of Research and Classification as Research

PART A
Part A provides the information necessary for HEPs to determine what can and cannot be included under Categories 1-3 of the Research Income Return - Return1.

For information on Category 4 (CRC research income) refer to Part B of this specification document.

7. Research Income Return - Return 1
7.1 General requirements
HEPs should only include net receipted income in their research income return. This income must:

  • be recognised in the HEP's financial system as being related to the 2011 year, consistent with its audited financial statements. Category 4: CRC research income should be related to the 2010-11 financial year;
  • be classified into categories (see section 7.11 of Part A) according to the organisation providing the funds;
  • comply with the definition of research (see section 1.3.10);
  • be retained in a HEP's accounting systems and verified by the HEP's audited financial statements unless exempt as income received from a CRC; and
  • be reported in accordance with the Financial Statement Guidelines for Australian Higher Education Providers for the 2011 Reporting Period.

HEPs should apply the principle that no income is to be double counted, or included in the income returns for multiple years.

IMPORTANT NOTES:
Section 7.2 provides guidance in respect of the net receipted research income that can be included in a HEP's research income return.

Section 7.3 outlines income that cannot be included. These lists are not exhaustive and it is the department's expectation that HEPs work with their auditors in determining which research income can be reported under the HERDC.

Sections 7.4 to 7.10 provide additional information in respect to the treatment and reporting of net receipted income.

HEPs must only report net receipted income that is for the purposes of conducting research. See section 7.5 'Treatment of partial research income'.

Section 7.11 outlines guidance in respect of categorising allowable net receipted income. Research income for 2010 (Categories 1, 2 and 3) and 2009-10 (Category 4) or earlier years omitted from previous collections should not be included. However, HEPs may count research income for 2010 (Categories 1, 2 and 3) or 2009-10 (Category 4) ONLY where the HEP has made a genuine omission of that income from its previous year's HERDC return and the HEP can verify to its auditor's satisfaction that the income has not been reported in the previous year's return.

A HEP must reduce the research income reported for a particular category where research income received in 2010 or an earlier year has been refunded in 2011.

7.2 Net receipted income which can be included in the Research Income Return – Return 1

  • stipends and scholarships for HDR students enrolled at the HEP, unless explicitly excluded in section 7.3 of Part A
  • competitive, peer reviewed HDR stipend and scholarships from non-Australian industry or non-Australian Government agencies
  • income derived from the investment of donations, bequests and foundations
  • travel grants where funds are provided specifically for the purpose of travel and used to enable access to a program of research. Researchers using the funds are expected to be active participants in the research program, rather than observers or visitors
  • funds provided for the conduct of clinical trials provided the purpose of the trial meets the definition of research
  • research infrastructure grants (unless explicitly excluded in section 7.3 of Part A). This includes grants for specific and specialised equipment used for the conduct of research
  • income from overseas HEPs provided specifically for the conduct of research
  • income used to manage staff directly engaged in the conduct of research or providing professional, technical or clerical support or assistance to those staff*
  • income received in support of:
    • professional, technical, administrative or clerical support staff directly engaged in activities essential to the conduct of research**
    • the activities and training of HDR students enrolled at the HEP:
      • this includes funds providing the cost of a student's HDR fee-paying place, but excluding Commonwealth supported places or places funded through the RTS. Funds include tuition fees that fee paying students (non Commonwealth supported) pay to their HEP for a HDR program or HDR-related course of study
    • the development of HDR training and courses
    • the supervision of students enrolled at the HEP and undertaking HDR training and courses
    • research and experimental development into applications software, new programming languages and new operating systems (such R&D would normally meet the definition of research as per section 1.3.10)
  • for the HERDC reference year, where a HEP receives a general or untied grant from an Australian government (whether Commonwealth, state, territory or local) for the purposes of conducting research, the HEP may report the proportion of that grant that can be clearly and transparently attributed as to be expended on the direct costs of conducting research (see section 7.6). HEPs must exclude indirect costs of conducting research to be expended from the grant.

7.3 Research income which cannot be included in the Research Income Return – Return 1

  • any income above the amount of net receipted income
  • any research income received by the HEP from its subsidiaries
  • any research income received by the HEP from any other Australian HEP or its subsidiaries except in respect of shared research income (in accordance with section 7.8 of Part A) or transfers (in accordance with section 7.9 of Part A)
  • any income received by a HEP or its subsidiaries for the rental and use of its facilities and accommodation, even if this is related to the conduct of research
  • any third party income (except where the third party is a subsidiary of the HEP or where the HEP has made payments for goods and services in support of the conduct of research under the control of the HEP)
  • any scholarships or grants that are provided by the HEP for its own students
  • income received in respect of fees that have been charged by a HEP to a domestic HDR student who has exhausted his/her RTS funding entitlement and has continued his/her enrolment
  • income received in respect of Commonwealth contributions paid by the Australian Government directly to HEPs for Commonwealth supported places
  • income received by honours students, or by HEPs on behalf of honours students, for the research component of their honours degrees, including externally funded scholarships or stipends
  • any research income not related to a HEP but received by its affiliated organisation/s
  • in-kind contributions
  • capital grants
  • National Collaborative Research Infrastructure Strategy (NCRIS), Australian Research Council (ARC) Linkage-Infrastructure, Equipment and Facilities (LIEF), and Independent Research Institutes Infrastructure Support Scheme (IIRIS) grants
  • grants from the Higher Education Endowment Fund (HEEF) or the Education Investment Fund (EIF)
  • funds received through the ARC's Research Networks scheme
  • funds from the Commonwealth Grants Scheme (CGS)
  • for the HERDC reference year, income received from a general or untied grant from an Australian government (whether Commonwealth, state, territory or local) that cannot be attributed as to be expended on the direct costs of conducting research, even if the income was provided for research purposes. HEPs must not include indirect costs of conducting research that are to be expended from the grant (see section 7.6)
  • income received from government grants that are for other purposes which have been specified by the funding source or sponsor (such as teaching), even if a proportion of income is to be expended on the conduct of research at the HEP's discretion
  • income received by HEPs from the sale of assets, even if that income is to be expended on the conduct of research at the HEP's discretion
  • 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
  • interest income accruing to research grants and contract research grants
  • research income received by independent operations which do not meet the definition of a subsidiary as defined at section 1.3.13
  • income from the High Performance Computing and Communications Program, to or through the Australian Partnership for Advanced Computing
  • income provided for preparation for teaching
  • funds used for:
    • scientific and technical information services
    • general purpose or routine data collection
    • standardisation and routine testing
    • feasibility studies (except into research and experimental development projects)
    • specialised routine medical care
    • commercial, legal and administrative aspects of patenting, copyright or licensing activities
    • routine computer programming, systems work or software maintenance
  • grants from the following DIISRTE programs:
    • Research Training Scheme (RTS)
    • Joint Research Engagement (JRE)
    • Sustainable Research Excellence (SRE)
    • Research Infrastructure Block Grants (RIBG)
    • Commercialisation Training Scheme (CTS)
    • Australian Postgraduate Awards (APA)
    • International Postgraduate Research Scheme Awards (IPRS)
    • Collaborative Research Networks (CRN)

    IMPORTANT NOTE:
    For the sections below, the following requirements remain applicable:
    Income must be net receipted income (definition at section 1.3.8)
    Income must be attributed to activities which comply with the definition of research (definition at section 1.3.10).
    Income must be consistent with the inclusions identified at section 7.2.
    Income must not be third party income (explanation at section 7.4).

7.4 Third party income
Third party income (as defined in section 1.3.15) cannot be reported under a HEP's Research. Exceptions are:

  • where the third party is a subsidiary of the HEP 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.

7.5 Treatment of partial research income
It is often the case that HEPs receive funding for the conduct of research projects, but there can be funding for activities that do not comply with the definition of research (as per section 1.3.10) or are excluded under section 7.3.

HEPs are reminded that, for the total income that they receive for each research project, they can only report net receipted income they have received for the HERDC reference year for activities which comply with the definition of research and are consistent with the inclusions identified under section 7.2.

This approach is consistent with the treatment of general and untied income from government grants for the purposes of conducting research (see section 7.6).

7.6 Treatment of general and untied income from government grants
For the HERDC reference year, where a HEP receives a general or untied grant from an Australian government (whether Commonwealth, state, territory or local) for the purposes of conducting research, the HEP may report that proportion of the grant that can be clearly and transparently attributed as to be expended on the direct costs of conducting research. HEPs must not include indirect costs of conducting research to be expended from the grant.

In identifying the direct and indirect costs of research supported by this general or untied income from each eligible government grant, HEPs must use a method that is consistent with the principles and method that they have adopted to implement the transparent costing under the Sustainable Research Excellence (SRE) initiative.

HEPs must not include any income received from government grants that are for other purposes which have been specified by the funding source or sponsor (such as teaching), even if a proportion of income is to be expended on the conduct of research at the HEP's discretion.

As per section 7.3, funds from the Commonwealth Grants Scheme cannot be included.

7.7 Treatment of income from HEPs' affiliations/partnerships with external organisations
The key requirement is that HEPs can only report net receipted income under their research income return; i.e. retained in a HEP's accounting system and verified in its audited financial statements.

Where HEPs have entered into formal employment arrangements with researchers in affiliated or partner organisations (external to the HEP), income that can be reported must be net receipted income and commensurable with the employment arrangements.

However, HEPs can report the total amount of income for a research project*** - even if the researcher(s) conducting the research project is partially employed by the HEP (i.e. the HEP pays a proportion of salary direct to the researcher or there is a formal legal relationship or agreement which covers employment) - as long as the HEP is the grant recipient and where that total amount of income is net receipted income (i.e. received, retained in the HEP's accounting system and verified in the HEP's audited financial statements).

Employment arrangements must be bona fide. HEPs must exclude that research income which is subject to cost reimbursement arrangements with affiliates or partner organisations (i.e. to reimburse research costs, including researcher salaries) which are not explicitly covered within a formal legal relationship between the HEP and the external organisation.

IMPORTANT NOTE:
The transitional arrangements that applied to the development of formal arrangements with researchers in affiliated partner organisations for reporting of research income under section 7.7 are no longer valid. Formal arrangements must be in place for income received from HEPs' affiliations/partnerships with external organisations in 2011 to be counted.

7.8 Income received through shared research arrangements
This section describes the circumstances under which income received through shared research arrangements may be reported as research income.

HEPs should note that there is not a separate category for income received through shared research arrangements. Shared research income should be assigned to the appropriate reporting category as listed in section 7.11 of Part A according to the original source of the income.

7.8.1 Shared research income
A grant is considered shared research income if a component of the grant is passed from the primary recipient to another party, where that party is named in the contract/agreement for the grant or tender/application for funding. A party may be a HEP, the staff of a HEP, or another research performing organisation.

For example, if HEP A receives a grant of $50,000 of which $20,000 is transferred to HEP B, HEP A should report $30,000 and HEP B $20,000. Double counting should not occur. It must be possible for the net receipted income by each HEP to be identified in its audited financial statements.

7.9 Transfers
Where a HEP's staff are transferring to another HEP and carry research grant funding with them, this must be reflected in adjustments to the affected HEPs' income returns. The receiving HEP should categorise the income according to the organisation that originally provided the funding.

7.10 GST
Where a HEP provides research services and charges GST, it should report only the research income it receives exclusive of GST.

7.11 Research income categories
Subject to complying with the definition of research (see section 1.3.10) and the specifications set out in Parts A and B, HEPs must enter all research income into Research Income Return - Return 1 according to the following four categories:

  • Category 1: Australian competitive grants
  • Category 2: Other public sector research income
  • Category 3: Industry and other research income
  • Category 4: CRC research income

Specifications for Categories 1, 2 and 3 are set out in sections 7.11.1, 7.11.2 and 7.11.3 of Part A.

Specifications for Category 4 are set out in Part B.

IMPORTANT NOTES:
The department expects HEPs to manage their own processes for categorising research income correctly. To minimise risks in incorrect categorisation, it is suggested that HEPs nominate the appropriate HERDC income category (or categories) at the time that funding agreements, grants or contracts are executed. Affected faculties or departments should be provided with this information to help ensure that all income is coded to the correct HERDC income category for the duration of the funding.

Where HEPs have received funding from multiple sources for a research project, then funding must be apportioned to the correct category based on each funding source.

* See also Section 7.4, Third Party Income; this includes 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.
** See note above.
*** HEPs should still apply requirements under section 7, including 7.5 and 7.6, as necessary.