Full Costing

The interviewees realised that full costing needed to be used in areas of economic activity. The interviewees also mentioned that the implementation period for full cost systems of the previous Research Framework had expired.[1] As some of the interviewees explained, to enable a real full costing method, the universities would need to change from governmental accountancy (kameralistische Buchfuhrung) to double entry book keeping (Doppelte Buchfuhrung) which would allow them to simulate an economic accounting system. This would, however, be both very difficult to achieve and a significant change for public accounting in universities in Germany. The universities were currently working on financially simulating a private sector company for the areas identified as economic in nature, using full costs for them and adding VAT. However, none of the universities under scrutiny had, at the time of the interviews, implemented a real full costing methodology. Instead they were using overhead rates in addition to direct costs which usually differed between subjects. Partly they were already able to prove the full costs for some of their activities the results of which had informed the overhead rates and they generally aimed at having real full costing systems in the future. Many stated that they often needed to sign a clause in agreements stating that they comply with state aid law.

Full costing is, according to the interviewees, not defined by a common approach or guidelines at the federal level or in three of the four Lander under scrutiny (Bremen, Baden-Wurttemberg and Berlin).[2] Bavaria seems to be the exception since a state working group has agreed a framework of how to separate accounts and calculate costs which formed the basis for the individual models. Some interviewees stated that they exchange information about their methodolo- gies/rates with other organisations and that the approach used needed to be approved by a certified accountant. The accountants would generally approve the approach/rate rather than the price for every individual contract. The information exchange and the approval required may, according to some interviewees, have led to similar approaches and rates because the accountants usually approved systems for a number of universities and it was easier to suggest using the same scheme. Also accountants may be worried that it could look ‘suspicious’ if they approved rates which varied extensively between universities.

Conflicts with competition law in this respect could mainly occur if an area is erroneously classified as non-economic and costs and accounts are not separate and/or market price, full costs plus or the maximum economic benefit are not used. This could amount to hidden state aid or competitors could challenge unreasonably low prices as being predatory pricing. Also, publicly funded research might potentially be economic in nature and it would then not generally be sufficient that the public funder only covers the direct costs. Additionally, as many interviewees stated, the costing systems might not be completely sound yet. While the universities are currently working on this, it could in the meantime lead to unreasonable prices. Finally, if overhead rates are agreed upon between universities or are discussed to an extent beyond discussing which factors need to be included, this might potentially be regarded as anti-competitive in itself.[3]

  • [1] The previous Research Framework (n 43) in Section 10.2 compelled Member States to introduce changes to their costing and accounting systems of research organisation until 1 January2009 which allowed them to separate costs of economic and non-economic activities in order toavoid cross-subsidisation.
  • [2] On the federal system as regards research policy see Chap. 4 Sect. “The GovernmentalStructure”.
  • [3] On anti-competitive information exchange systems see, for example, case C-7/95 P JohnDeere (Judgment of 28 May 1998, EU:C:1998:256). See also the English private school case discussed in Chap. 3 Sect. above.
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