Service Centers
REG10.05.9
Authority: Vice
Chancellor for Finance and Business
History: First Issued: January 1, 2002. Last Revised: March 3, 2004. Additional
History Information.
Additional References: Form CG-006
Contact Info: Assistant Director, Systems and Compliance (919) 515-8011
Office of Contracts
and Grants.
1. Introduction
This statement provides information about the procedures for establishing
and reviewing use rates of Service Centers. This statement clearly defines
the roles and responsibilities for both the Office of Contracts and Grants
and the Service Center personnel in assuring compliance with all requirements
when charging a contract and grant project for the services. Note that the
roles and responsibilities outlined below relate only to contract and grant
issues. The service center should contact University Accounting and the Budget
Office for additional responsibilities concerning the operation of these projects.
2. Definitions
A Service Center, which includes recharge centers and specialized service
facilities, is a University unit/facility organized specifically to provide
goods and/or services primarily to other University departments/units. The
costs of these goods and/or services are charged directly to internal and
external users based on established billing rates and actual usage of the
services. The schedule of rates charged for a good or service should be based
on actual costs and these rates cannot discriminate to the detriment of sponsored
activities (ledger 5 projects). All users must be charged for the use of the
services provided. Rates charged to contract and grant projects cannot be
higher than rates charged to any other users.
3. Roles and Responsibilities of the Service Center
Please note that the roles and responsibilities outlined below relate
only to contract and grant issues.
3.1. Submit requests for new projects in accordance with all University procedures.
3.2. Monitor the accounting transactions to ensure the project is used only
for the purpose approved and is not used to account for unrelated revenue
or expenditures.
3.3. Complete the Service Center Use Rate form for each type of service that
will charge contract and grant projects and submit to the Office of Contracts
and Grants. The rate form(s) should be accurate and submitted timely.
The use rates should include only allowable direct and indirect costs
as described in Section III. The use rates should comply with the requirements
of Federal Circular A-21, University Cost Accounting Standards and the
University Service Center Policies, Regulations and Rules.
3.4. Complete the Service Center Waiver Certification Form for any service
that will not charge contract and grant projects. It is the responsibility
of the service center to take the necessary steps to ensure contract and
grant projects are not subsequently charged for the services.
3.5. Determine which, if any, Facility and Administrative (indirect) cost
items will be included in the rate. The items identified in the F&A
Section on the Use Rate Form are optional.
3.6. Determine the rate development methodology that is most appropriate.
For example, whether to use historical data, projected data or a combination
of both.
3.7. Ensure contract and grant projects are not charged for the services
before the effective date of the approved rate.
3.8. Ensure service center usage is adequately documented through records
such as daily logs.
3.9. At least annually review the operations of the service center. Submit
a new rate form to the Office of Contracts and Grants if there are changes
that require the rate form to be adjusted.
3.10. Review the cash balance of the service center at least annually. If
the cash balance exceeds 2 months operating expenses, the justification
for the excess cash must be documented in the service center files. If
the cash balance cannot be justified, the service center is responsible
for correcting the problem through rate adjustments or other appropriate
measures. The custodian of the project must ensure cash is not transferred
out of the project to correct any excess cash balance problems. The Service
Center is responsible for identifying projects/rates that have potential
excess cash issues.
3.11. Monitor billings to ensure contract and grant projects are being charged
the approved rates. Also ensure non-contract and grant projects are not
being charged a rate less than the approved rate or that any "un-billed" use has been accounted for in the utilization figures. The Office of Contracts
and Grants must approve this utilization adjustment option.
3.12. Ensure other procedures are followed with regards to the operations
of the service center projects. The Budget Office and University Accounting
should be contacted for these additional requirements. The Office of Contracts
and Grants does not review requirements of these offices when reviewing
rate forms.
4. Responsibility of the College Dean/Associate Vice Chancellor
4.1.
Certify annually that all Service Centers in his/her college/unit are compliant
with University Policies, Regulations and Rules as outlined in this section,
REG 10.05.9.
5. Responsibilities of The Office of Contracts and Grants
5.1. Assist service centers as requested by the project custodian in the
rate development process.
5.2. Provide building cost and space information to the Service Center.
5.3. Maintain current rate forms and instructions. F&A cost component
rates should be updated as appropriate.
5.4. Review and approve rate forms submitted by the service centers for compliance
with Federal Circular A-21, University Cost Accounting Standards and the
University Service Center Procedures.
5.5. Within 90 days of the close of the fiscal year, send a reminder notice
to the service center to review the financial operations of the center
and if appropriate submit a revised rate form for approval. This letter
gives a general outline of the areas that should be reviewed and is sent
in conjunction with the annual cash review.
5.6. Annually by August 1 the Office of Contracts and Grants will distribute
the Dean/Vice Chancellor Certification Letter to each College/Unit.
5.7. Within 90 days of the close of the fiscal year send a memorandum to
all Service Centers with approved rates reminding them to review their
projects for potential excess cash issues. The letter will instruct them
to document the justification for any excess cash and place the justification
in their files. Provide assistance and guidance for the annual operational
review and/or the cash balance justification process if requested by the
service center.
6. General Guidelines
6.1. Trust Fund Projects - Departments or organizational units that have
responsibility for a Service Center must establish a trust fund project
or projects for the deposit and disbursement of funds for the center.
The service center projects should be used to account for the expenditures
and revenues of the service center only. These projects are not to
be used for purposes that do not relate to the service center. In
addition, funds should not be transferred out of the project for an unrelated
purpose.
6.2. Charges to Contract and Grant Projects - Service Center costs are allowable
as charges to contract and grant projects only if the Office of Contracts
and Grants has reviewed and approved the center's use rate schedule(s)
and supporting calculations.
6.3. Use Rates - Service Center use rates are subject to the terms and conditions
of Federal Circular A-21, University Cost Accounting Standards and the
University Policies, Regulations and Rules, REG10.05.9. Rate schedules
and Service Center use rate calculations must support each separate rate
charged by the Service Center. Note: the service center cannot use the
use rates until the rates are approved by the Office of Contracts and
Grants.
Rates charged by Service Centers must be designed to recover not more
than the aggregate costs of the goods or services over a long-term
period. For
this reason, billing rates must be reviewed annually, compared to actual
costs and utilization, and adjusted if necessary. The Office of Contracts
and Grants
will send a reminder letter to the Service Center within 90 days of
the close of the fiscal year. This letter will remind the centers
to perform this review and if necessary to submit an updated service
center use
rate calculation
form to the Office of Contracts and Grants for review and approval.
As a general rule, no more than 60 days operating cash should be on
hand
(excess cash balance)
in the service center trust fund project. Within 90 days after the
close of the fiscal year The Office of Contracts and Grants will send
a memorandum
to all Service Centers with approved rates on file reminding them to
review their projects for potential excess cash issues. The Service
Center must
document
the justification for any excess cash issue that they find. These justification
letters should be maintained in the Service Center files and be available
upon request. The Office of Contracts and Grants will not review the
justifications unless requested to do so by the Service Center custodian.
Possible justifications
for excess cash include the accumulation of indirect cost revenue,
billings to non- contract and grant customers at a rate higher than
the contract
and
grant rate or cyclical factors that would produce uneven revenue or
expenditure streams. The justification must be supported by financial
data. If the
project
contains multiple rates, the justification must identify the excess
cash for each rate. If the excess cash cannot be justified a new use
rate
form must
be submitted to the Office of Contracts and Grants for approval. The
new rate should take into account the excess cash amount. Excess cash
cannot
be adjusted
by transferring cash out to an unrelated activity or by transferring
unrelated expenses into the service center. If you determine that the
excess cash
cannot
be justified and you need to lower your rate, you will not be required to
adjust prior billings (i.e. refund any money to past customers) as
long as
you can demonstrate you are performing these periodic cash reviews.
Federal regulations allow the excess cash to be taken care of in future
billings.
However, the key to this is identifying the inappropriate rate within
the time allowed by the regulations. If you do not, it could result
in a loss
of funds.
6.4. Allowable Costs - Use rates must be established based on the annual
operating costs charged to the trust fund project. Projected operating
costs may be used to develop the initial use rate. However, subsequent
rate updates should be based on actual operating costs and should be
supported by a cost study. In addition to direct operating costs,
F&A
costs can be included in the use rate. The particular F&A items
to be included are left to the discretion of the service center. The
sum of direct and F&A costs forms the numerator of the rate calculation.
All direct and indirect costs included in the use rate calculation must meet
the criteria for allowable costs. Costs that are unallowable, including such
expenses as entertainment costs, alcoholic beverages, public relations, and
alumni activity expenses, should not be included in the rate calculation.
In general, the costs that are allowable include the following:
6.5. Direct Costs - Direct costs include expenses that are readily identifiable
and are related directly to the Service Center, such as salaries,
wages, and fringe benefits for the personnel associated with the Service
Center; equipment repair and maintenance costs; non-routine repairs
and renovations to the space occupied by the Service Center; technical
supplies and materials; travel; and outside services.
Note: salaries, wages, and fringe benefits for technical staff must be included
as a direct component of the rate for those personnel actually performing
the service that is offered by the service center. Administrative staff are
included as an indirect component of the rate, specifically in the departmental
administration section, unless an unlike circumstance exists.
The salaries, wages, and fringe benefits for both
technical and administrative employees must be paid from the service center
project if the project is a self-supporting service center (i.e. in the second
half of ledger 3). This is a budget office requirement, not a requirement
of contract and grant regulations. Contact the budget office for additional
information on charging salaries to ledger 3 accounts.
In addition to the above, purchases of equipment cannot be a direct
component of the use rate. Only the depreciation associated
with equipment used in the
service center is allowed as a component of the use rate. Equipment
depreciation is discussed in the F&A cost section of this statement.
6.6. Facilities and Administrative Costs - F&A costs are expenses
that are incurred for common or joint purposes and are not
readily assignable to the Service Center but may be included in use rate
calculations.
These costs include (a) equipment depreciation; (b) building
depreciation; (c) physical plant / building interest; (d) general administration;
and (e) departmental administration.
6.6.1. Equipment Depreciation - Equipment depreciation
must be based on costs net of federal funding. Depreciation must
be calculated
using the straight-line method based on the equipment's estimated
useful life as assigned by the University's Capital Asset Management
Office. Depreciation
may not be taken beyond the estimated useful life of the equipment.
Equipment depreciation must be documented by a detailed listing of
the Service Center's
equipment including location, description, CAMS/Identification
number, date of purchase, net cost, use allowance previously claimed,
if any, adjusted
cost, estimated useful life and annual depreciation amount. The
Service Center is not required to leave the depreciation component
in for any given asset
until the asset is fully depreciated. Contact the University's
Capital Assets Management Office in the University Accounting Office
for assistance with
developing equipment listings.
6.6.2. Building Depreciation - Building Depreciation
must be based on the current year building depreciation
costs net of federal funding.
The current year depreciation costs are allocated to the Service
Center on the basis of the percentage of square footage occupied by
the Service Center
to the total net assignable square footage for the building
in which it
is located. A listing of rooms occupied and square
footage for each room should
be included with the use rate calculation. Contact the Office
of Contracts and Grants for building cost and square footage information.
6.6.3. Physical Plant / Interest on Construction
Loans - F&A
costs for physical plant /interest on construction loans must be based on
the square footage occupied by the service Center multiplied by the physical
plant / interest on construction loans indirect cost per square foot contained
in the University's current F&A cost rate. The current rate can
be found in Section II on the Use Rate Form. The physical plant cost
per square
foot
includes costs for physical plant administration, utilities, public
safety, interest on construction loans and general maintenance of
University facilities.
6.6.4. General Administration - F&A costs for general administration
must be based on the modified total direct costs * for the Service Center
multiplied by the percentage component for general administration contained
in the University's current F&A cost rate. The current rate can
be found in Section II on the Use Rate Form. General administration
costs
include those
expenses incurred in performing University-wide administration and support.
6.6.5. Departmental Administration - F&A costs for departmental
administration must be calculated on the modified total direct cost * for
the Service Center multiplied by the percentage component for departmental
administration contained in the University's current F&A cost
rate. The current Departmental Administration rate can be found in
Section II
on the
Use Rate form. Departmental Administration costs include administrative
and support costs such as clerical and administrative salaries, office
supplies,
postage, local telephone and memberships and subscriptions.
* - Modified Total Direct Costs for Service
Centers excludes tuition, rental costs of off-site
facilities, scholarships and fellowships
and the portion of each subgrant or subcontract over $25,000.
NOTE: This definition should not be used when computing F&A
costs for contract and grant (ledger 5) accounts. This only applies
to service center accounts.
6.7. Utilization - The basis for charges to users of Service Center services
must be the actual usage incurred in terms of appropriate units such
as labor hours, CPU hours, number of samples, etc. In initially developing
the use rate, projected utilization may be used as the denominator of
the use rate calculation. Subsequent rate updates should be based on
actual utilization. Actual utilization must be documented and records
maintained for audit purposes. Records, such as daily logs, must be
maintained to record all usage, including billed and unbilled use, for
purposes of verification of the rate calculation and billing charges.
The use rate should not be set at a rate that subsidizes any unbilled
usage of the service center. Records must be maintained separately for
each separate use rate that is being charged. This is needed to ensure
that all usage and the related revenues can be verified.
6.8. Waiver Certification Form - If the service center does not plan to
charge any contract and grant project for the use of the service, the
account custodian can sign a Contract and Grant "Service Center
Waiver Certification" form. The custodian is certifying
that no contract and grant project will be charged for any
listed project. They
also certify that if changes occur that would require charges
to contract and grant projects, the center will apply for a
use rate prior to charging
any contract and grant project. Finally, they certify that
they understand the waiver does not release them from complying
with other University
regulations associated with the operation of the service center
project. The Office of Contracts and Grants agrees to waive
the use rate form
approval process upon receipt of the certification.
6.9. Annually by August 1 the office of Contracts and Grants will distribute
a memorandum to the Dean/Associate Vice Chancellor of the college/unit
where the service centers reside. The Dean/Associate Vice Chancellor
will be required to certify that all their Service Centers are compliant
with University procedures including that the service centers:
6.9.1. Operate with approved rates or are operating within the terms of
the waiver agreement.
6.9.2. Actively review their activities and rates on an annual basis to
confirm accuracy and compliance with Federal Circular A-21, University
Cost Accounting Standards and University Policies, Regulations and
Rules, REG10.05.9 .
6.9.3. Determine that the service center does not have an excess cash balance
without an adequate justification.
6.9.4. Assure that the service center does not charge contract and grant
projects at a higher rate than that charged to any other users.
7. Service Center Procedures
7.1. Individuals responsible for operations of a Service Center must complete
Form BA-108, Request for Institutional or Special Trust Fund Account and
Form BA-109, Unrelated Business Income Questionnaire to initiate the establishment
of a trust fund project to account for the revenues and expenditures of
the Service Center. (For more information regarding these forms, please
contact the University Accounting Office) Both of these forms, BA-108
and BA-109, should be forwarded to the
Office of Contracts and Grants along with Form CG-006, Service
Center Use Rate Calculation.
(You only need to complete Form CG-006 if you plan to charge contract
and grant (ledger 5) projects.) The BA-108 and BA-109 will be forwarded
to the
University Accounting Office by the Office of Contracts and Grants
upon approval of the Form CG-006 (or acceptable substitute form)
Once the request is reviewed
and approved and all necessary information has been obtained, the
University Accounting Office will return a letter to the individual
requesting
the project
indicating whether or not the project has been approved. If a project
is approved, a Trust Fund Authority citing terms and restrictions
will be sent to the person
originating the request. The Trust Fund Authority will also have
the trust fund project ID on it that is to be used to account for
receipts
and expenditures
associated with the Service Center. University Accounting should
be contacted concerning any questions about the Trust Fund Authority.
7.2. Use rates charged for each service offered by the Service Center must
be developed by the responsible individual(s). Complete Form CG-006, Service
Center Use Rate Calculation, for each separate use rate that will be charged
to users of the Service Center and forward it to the Office of Contracts
and Grants. Due to the complexity of the cost structure or service there
will be times where the standard Form CG-006 will not be appropriate.
The Office of Contracts and Grants will work with the Service Center in developing
a rate form that will be appropriate based on the specific circumstances of
the Center. If your college has centralized the service center function, the
appropriate college representative must also sign if the rate form is for
a new project. If the Use rate calculation form does not have an authorized
signature, it will be returned through the service center contact for proper
signatures. Regardless of whether you are centralized, or not, a copy of the
approved rate form will always be sent to the service center contact, once
approved.
Form CG-006 and instructions for its completion may be downloaded from the Contract and Grants Website. Contact
the Office of Contracts and Grants for any assistance needed in determining
use rate calculations.
The use rate calculations will be reviewed and the responsible individual
(and the college contact if one is designated) will receive a copy of the
form indicating approval when the rate is approved by the Director, Office
of Contracts and Grants.
7.3.
If actual utilization or operating costs, including F&A
costs, have decreased or increased significantly, use rates must
be updated to reflect
these changes and submitted to the Office of Contracts and Grants
for approval.
NOTE: Equipment purchases should be excluded when reviewing operating costs
since equipment purchases cannot be included as part of the use rate.
If use rates need to be revised, complete Form CG-006, Service Center Use
Rate Calculation, for each separate use rate and forward it to the Office
of Contracts and Grants. Significant variances between actual costs and billed
costs should be resolved through adjustments when updating use rates.
