REG 10.05.09 - Service Centers
Authority: Vice Chancellor for Finance and Administration
History: First Issued: January 1, 2002. Last Revised: March 3, 2004.
Contact Info: Assistant Director, Systems and Compliance (919-515-8011) Office of Contracts and Grants
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.
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, REG10.05.09.
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, REG10.05.09. 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, REG10.05.09 .
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.