FY 2010/11 Budget Instructions
Attachment C: Service Center Recharge Rates

In accordance with GAP 200.300, Service Component Administration; OMB Circular A-21 and CAS (Cost Accounting Standards), the management of service centers and the setting of associated rates must meet specific requirements. These requirements are highlighted below.

Recharge rates should be developed as part of the budget development process. However, in order to afford departments adequate time to develop more comprehensive documentation to support the rate development process, we are separating the rate documentation process from budget submission. Rate documentation (in accordance with details specified herein, and GAP 200.300) should be submitted to the Management Centers by May 1st, 2010. Management Centers will review this documentation for accuracy and completeness and forward to Jim Luther, Assistant Vice President, Cost and Reimbursement Accounting for approval per Federal regulations.

DEFINITIONS AND BACKGROUND:

Service Centers are organizational units or activities that provide goods or specific technical or administrative services for internal University operations and charge the user for these goods/services. The two types of service centers are:

1. Service Component (defined in GAP 200.300):
   Currently Service Components are in the 157-9xxx fund series (e.g. Copy Center, Lab Animal Resources). Service Components provide goods and/or services as a convenience to faculty, staff, and students, and in general, generate greater than $250,000 of revenue per fiscal year. The expense base can include both internal service center support costs (direct expenses) and space and general administrative costs (indirect expenses).
   
   
2. Shared Resource:
   A cost center providing goods and/or services that do not represent the major purpose of the generating department (e.g. departmental electron microscope and DNA Sequencing Lab). The services are intended as a convenience to faculty, staff, and students. Rates are based on direct costs only and can include internal cost center support costs. Generally, these operations will generate less than $250,000 of revenue per fiscal year.
   • Shared Resources are excluded from this process if they
     • generate less than $50,000 annually and less than 25% of sales are direct charged to federal grants and contracts (30x-xxxx through 34x-xxxx)
       
       
   • Department copiers, fax machines, etc. are not considered to be service centers if the charge is reasonable and is merely to recover the cost of supplies (paper, toner, etc.).

ESTABLISHMENT OF CHARGING RATES

Recharge rates established by Service Centers should be based on the cost of providing services and not what independent, for-profit businesses are charging for the same or similar services. In some cases it may be appropriate to establish rates that are designed to recover less than "full cost". Full cost can include both direct and indirect expenses (indirect costs can only be included for Service Components) of providing the service, although certain types of expenses must be excluded from rate determination calculations because they are unallowable for federal reimbursement.

Allowable Costs:

Direct: Salaries, wages, fringe benefits, supplies and materials, subcontracts, and outside services.

Indirect Costs: (allowable for Service Components but not Shared Resources)	G/L Account
General and administrative expense	9011/12
Space rental charges	9009
Departmental allocation of internal administration expense (if applicable)	9013/14
Betterments reserves (can’t exceed straight-line depreciation on facilities and equipment)	6923
Actual depreciation (only allowable if Betterments reserves (6923) are not utilized)	6924/25
Reserve for Minor Acquisitions	6943
Interest expense related to debt financing and included as a portion of debt service	8017

Unallowable Costs:

The following must be excluded from all billing rates for all Service Centers:	G/L Account
Scholarships/Fellowships	63XX
Capital Acquisitions	66XX
Advertising and Publicity	6902
Bad Debts	6910/6911
Contributions/Prizes/Subsidies	6918/6988
Public Relations Travel	6990/6991
Public Relations and Social Expenses/Alcoholic Beverages	6932/7101/7161/7162
Losses/Damages/Write-offs	6956
Transfers (except amounts to cover interest charges related to debt financing)	8XXX

The proposed operating budget submitted as part of the rate approval process should be in sufficient detail (by G/L account) to allow a determination that the costs identified above have been excluded from the billing rates. Questions regarding the allowability of specific costs should be addressed to the Director, Sponsored Programs and Cost Analysis, Tom Davis (668-5850.)

Included with the recharge rate(s) proposal should be a description of the methodology used to determine the rate(s) and all calculations necessary to determine the annual budgeted expense credit.

In accordance with OMB Circular A-21, the rates must be:

• Based on actual costs
  • Service centers can not generate a “surplus” for a prolonged period (see GAP 200.300 for OMB A-21 definition of “surplus”)
• Consistently applied to all customers
• Reviewed annually by the management center’s appropriate budgetary official and approved by Senior Director, Cost & Reimbursement Accounting

The Service Center Rate Calculation Form contains Attachment E-1 (Service Components) and E-2 (Shared Resource), which are "sample" worksheets that will assist the user in developing rates (one set of worksheets are "filled in" with sample data and one set is "blank"). These worksheets or other supporting documentation must include:

• Rate development methodology
• Rate documentation by G/L account to support identification of allowability or unallowability of costs
• Billing transaction information that identifies which G/L account is utilized in the charging transaction and what fund code is credited
• Identification of customer base by major category (e.g. Federal grants and contracts, other grants & contracts, Other)

 

APPLICATION OF APPROVED RECHARGE RATES

Recharge rates must be consistently applied to all University and Health Systems users. The proposed operating budget submitted as part of the rate approval process should be in sufficient detail to allow for the determination that rates are designed to apply uniformly to all service users.

Service Center recharge rates must be submitted to the Office of University Budgets and Analysis on an annual basis, along with the proposed operating budget for the service center. All recharge rates must be reviewed by the appropriate budgetary official prior to submission for approval:  

PAMC:	Amy Oates
SOM/SON:	Leroy Lee
CAMC:	John Clements

All recharge rates must be approved by Assistant Vice President, Cost and Reimbursement Accounting (Jim Luther) prior to their use.