èßäapp

Scope

This policy applies to all University operating units that administer Service Centers for the primary purpose of providing ongoing goods or services to University departments and incidentally to individuals and other External Users.  Auxiliary Enterprises that provide goods or services primarily to students, faculty, and staff for their personal use are not subject to this policy.

Reason for Policy

The purpose of this policy is to provide guidelines for the establishment and the financial administration of Service Centers to ensure accurate cost allocation, consistent billing practices, and compliance with applicable University and Federal regulations. 

Policy Statement

Service Centers provide products or services that might be purchased from commercial sources but are more economically and conveniently provided, or can be better controlled by the University.  Service Centers may recover their cost of operations by charging users for actual goods and services provided, using predetermined Billing Rates established in accordance with this policy.  The rates are calculated so that Service Centers recover no more than the cost of the goods or services provided and operate on a break-even basis over time.  Interdepartmental billings are the primary revenue source for a Service Center. 

All Service Centers that charge federal grants and contracts must comply with the federal cost recovery principles outlined in the OMB Uniform Guidance.  Non-compliance with federal regulations could result in the disallowance of charges and Government-imposed fines, and negatively influence future grant proposals.

Determining the Need for a Service Center and Formal Request
Before a Service Center can be established, there must be a determination that a valid need exists for the Center.  The following criteria will assist with that determination:

• A demand exists for a good or an identifiable service to be provided on a regular and continuing basis to more than one division, department, or user.
• The volume of the good or service to be provided must be quantifiable and significant.
• It is more convenient and cost effective to provide the good or service in-house rather than through an external supplier.
• The good or service to be provided is consistent with or incidental to the University’s education and research mission.

If there is a valid need for a Service Center, as determined by the above criteria, a “New Operation ChartField Request Form” must be approved by the Department Chair/Director of the requesting department and the appropriate Chief Financial Officer or their designee at each of the campuses, System Administration, and the Health Care System.  The forms will be electronically routed for review and approval. The Campus Accounting Office, in collaboration with the Campus Sponsored Program Office, will complete the final review and approval of the request and create the new ChartField. 

Types of Service Centers
At the University of èßäapp, Service Centers are divided into the following three categories:

1. Recharge Centers
2. Specialized Service Facilities
3. Service Operations

Recharge Center
A Recharge Center is a form of Service Center that typically provides a non-specialized activity within a college or division and not to the entire institution. The activities of a Recharge Center are generally incidental to the total departmental activity and typically operated to realize a cost savings for the college or division overall.  An example of a recharge center activity includes printing and copying done on a centrally managed printer and recharged to departmental users within that college or division.  However, units that provide a one-time distribution of expense or share the cost of a service or product on a nonrecurring basis are not considered Recharge Centers.

Specialized Service Facility (SSF)
A Specialized Service Facility provides highly specialized or complex services, to a select group of users, that are not readily available from an outside supplier, such as a computing facility or a reactor. 

Service Operation
Service Operations include all Service Centers that are neither a Recharge Center nor a Specialized Service Facility.  A Service Operation is created to provide a service, a group of services, or goods on a recurring basis to users principally within the University community for a fee and typically, there is value added by personnel in providing the good or service.  A Service Operation may incidentally have external customers; however, majority of revenues are from University departments. 

Rate Development
A Service Center develops the Billing Rate or fee for the activities based on a projection of current operating costs, both Direct and proportional Indirect Costs, and then charges users for their actual usage.  Rates charged to internal customers must be designed to recover not more than the total cost of providing the products or services over a long-term period and should be reviewed biennially and revised as necessary. 

Billing Rates used to charge Internal Users must be nondiscriminatory so that all Internal Users are charged the same rate for the same level of services or goods purchased in the same circumstances, regardless of funding source. 

Unallowable costs identified in OMB’s Uniform Guidance must be excluded from a Service Center’s Billing Rates.  Examples of unallowable costs include bad debt or uncollected billings, capital equipment purchases (only depreciation expense is allowable), entertainment, and marketing.  The capital equipment purchases must be purchased from plant funds; not charged to the operation.

Billing Rates used to charge external customers may be higher (but not lower) than those used to charge internal customers.  For the purpose of this policy, federal grants and contracts and other Sponsored Projects are considered Internal Users and will be charged an internal Billing Rate.  Revenue received from external customers may be subject to sales tax and Unrelated Business Income Tax.

If the Service Center activity provides a direct benefit to a particular Sponsored Project, then the charge to that Sponsored Project for the activity is allowable and will be included in the base for F&A calculation on the project.

Governing Principles that Apply to All Service Centers
Employees must be designated to be responsible for the Service Center’s operation, which includes:

• Administering the budget.
• Maintaining in accordance with University retention schedules, cost and use documentation necessary to satisfy accounting, budgeting, and auditing requirements, such as Billing Rate calculation work papers, documentation of actual operational costs, the amount and basis of user billings, equipment and depreciation schedules, and inventory schedules.
• Generating billings with appropriate detail at least monthly and on a timely basis after the good or service has been provided.
• Processing year-end billings consistently to assure that twelve (12) months of cost recovery are associated with twelve (12) months of incurred costs.

Definitions

Auxiliary Enterprise – an operating unit within the University primarily established to provide goods and services to students, faculty, staff, or incidentally to the general public for personal use and that charge a fee directly related to, although not necessarily equal to, the cost of the goods or services provided.  The operation must be designed to be self-supporting.

Billing Rate – the amount charged for each unit of goods or services provided by a Service Center to recover the costs associated with producing a good or providing a service.

Direct Costs – all costs that can be specifically identified with a service or good provided by a Service Center.  These costs include the salaries and benefits of University faculty and staff directly involved in providing the service or good along with supplies and materials that can be readily assigned to the service or good provided.  Direct Costs also include purchased services and equipment rental or depreciation.

External Users – are customers outside of the organizational structure of the University.  This includes students, faculty, and staff acting in a personal capacity.  This also includes other universities unless the University has subcontracted with them as part of a grant or contract.

Facilities and Administrative (F&A) or Indirect Costs – consists of costs of administrative and supporting functions of the University.  At the institution or campus level, these costs include general administration and general expenses, such as, executive management, payroll, accounting and personnel administration; operations and maintenance expenses, such as utilities, building maintenance and custodial services; building depreciation, interest expense related to capital, and administrative and supporting services provided by academic departments, libraries, and special administrative services provided to sponsored agreements. 

Federal Allowable Cost – a cost identified by the OMB Uniform Guidance as reimbursable by the federal government.

Federal Unallowable Costs – costs identified by the OMB Uniform Guidance that cannot be charged directly or indirectly to federal-sponsored programs, such as bad debts, entertainment cost, fines, and marketing.

Internal Users – are customers who are part of the organizational structure of the University or whose source of funds flow through the University, such as federal grants and contracts.

OMB Uniform Guidance – all federal awards made on or after December 26, 2014 are subject to the Office of Management and Budget (OMB) “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (also known as “Uniform Guidance”).  The Uniform Guidance replaced OMB Circulars A-21, A-110, and A-133.

Service Center – an operating unit within the University that sells goods or services primarily to other University departments on a regular basis for a fee that is based upon the actual cost of the goods or services. 

Sponsored Project – an externally funded activity that supports the University’s mission for which there is a defined scope of work and objectives to be accomplished by the University in order to produce a specific outcome or deliverable for the external user (sponsor).

Unrelated Business Income Tax – federal tax on net income from activities that are substantially unrelated to the University’s tax-exempt purposes.

Accountabilities

Chief Financial Officer or Designee:

• Fully review and authorize the establishment of each new Service Center
• Ultimate authority for the review and approval of the fiscal and programmatic aspects of the Service Centers

Campus Accounting Office:

• Assist Service Center Managers/Directors with the calculation and periodic review of Service Center Billing Rates for compliance with applicable policies and reasonableness compared to the costs of operations
• Create ChartFields to specifically identify Service Center financial transactions

Sponsored Programs Office:

• Assist Service Center Managers/Directors with financial compliance with federal regulations and applicable sponsor policies and the calculation and review of Service Center Billing Rates
• Assist Campus Accounting Office with review of rate structures when Sponsored Projects are involved.

Director/Manager of Service Center:

• Operate Service Centers in accordance with applicable policies
• Prepare, review, and adjust (as needed) the Billing Rate schedules
• Maintain accurate and complete records according to retention requirements
• Accurately charge internal and External Users on a timely basis

Additional Details

Forms

Related Information

Policy 27002 on Allowable Costs and Cost Principles

History

Formerly Business Policy Manual 204 – Recharge Centers (revised 6/12/2009)

Procedure