REG 10.05.09 – Service Centers
Authority: Vice Chancellor for Finance and Administration
History: First Issued: January 1, 2002. Last Revised: May 2, 2023.
Service Center Overview – Office of Facilities and Administrative Analysis
Contact Info: Manager, Office of Facilities and Administrative Analysis (919-513-3471)
This regulation provides information about the procedures for establishing and reviewing use rates of Service Centers. This regulation applies to Service Centers that charge or plan to charge federal clients (internal or external federally funded work). This regulation also defines the roles and responsibilities for the Office of Facilities and Administrative Analysis (OF&AA), the Service Center, and other college or unit personnel in ensuring compliance with all requirements when charging a federal client for goods and/or services. Service Centers charging federal clients must follow University Cost Accounting Standards and the Office of Management and Budget (OMB) Uniform Guidance. All Service Centers (whether charging federal contract and grant projects or not) are expected to follow other applicable North Carolina General Statutes and university policies, regulations, rules, and other guidance.
2.1. “Federal client” means both direct federal contracts and grants or those external clients that rely on federal flow-through funding.
2.2. ”Rates” mean the amounts charged by Service Centers to clients for a good or service. Rates should be based on actual direct costs that are allowable, allocable, and reasonable. All users must be charged for the use of the goods and/or services provided. Rates charged to federal contract and grant projects (including federal flow through), external federal customers, and internal users cannot be higher than rates charged to any other users for the same goods and/or services.
2.3. “Service Center” subject to this regulation, means a university unit/facility organized specifically to provide goods and/or services primarily to other university departments/units, and includes recharge centers and specialized service facilities. 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 goods and/or services. Service Centers also include any unit that charges or intends to charge clients, paying for services with federal funds (internal or external clients). Guidelines applying only to those charging external non-federal clients are indicated below.
3. OPERATIONAL PROCESSES
3.1. Service Center Accounts / Projects.
Departments or units that have responsibility for a Service Center must establish a Project ID segment within the university financial system for the deposit and disbursement of funds for the Service Center. The Service Center project should be used to account for the expenditures and revenues of the Service Center only. A Service Center project may not be used for purposes that do not relate to the Service Center. Furthermore, funds should not be transferred out of the project for an unrelated purpose.
3.2. Approved Use Rates to Federal Clients
3.2.1 OF&AA Rate Approval — Unless otherwise approved by OF&AA, Service Center costs are only allowable as charges to federal or external clients if the Service Center has a current OF&AA approved rate for that good or service. Service Center use rates are subject to the terms and conditions of OMB Uniform Guidance, North Carolina General Statutes, University Cost Accounting Standards and the University Policies, Regulations and Rules. Rates must be approved prior to doing any work for or billing federal contract and grant or federal customers.
3.2.2. Rate Setting to Federal Clients – Service Center use rate calculations must support each separate rate charged by the Service Center. Rates cannot disadvantage federal contract and grant or federal customers.
(a). Direct costs of providing the service, and no additional items, should be included in the use rate calculation. In general, allowable 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 Service Center technical personnel; equipment repair and maintenance costs; technical supplies and materials; travel related directly to providing the service(s); and other justified direct costs.
(b). Initial use rates should be developed using projected operating costs and usage. Subsequent rate updates should be based on actual direct operating costs and usage unless a material change is anticipated and justified. Rates charged to federal clients 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 at least annually (the “Annual Rate Review”), compared to actual costs and utilization, and adjusted if necessary.
3.2.3. Allowable Costs – Service Center use rates must be established based on the annual operating costs charged to the Service Center financial project. All costs included in the use rate calculation must meet the criteria for allowable direct costs. Costs that are unallowable, including expenses such as indirect costs, entertainment costs, alcoholic beverages, public relations, alumni activity expenses, or any other unallowable costs should not be included in the Service Center use rate calculation.
3.2.4. Other Direct Costs — The salaries, wages, fringe benefits for staff and all other direct costs must be paid from the Service Center project or another non-state funds project if the project is a self-supporting Service Center (i.e. Auxiliary Sales and Service Trust Fund, upper ledger 3).
The basis for charges to Service Center must be all actual usage incurred such as number of hours, samples, days, or other appropriate unit over the course of a year. All actual utilization must be documented and records maintained for audit purposes. Records, such as daily logs, must be maintained to record all usage for purposes of verification of the rate calculation and billing charges. Records should include documentation of use by all customers who received the service and must be maintained separately for each use rate that is being charged. This documentation is needed to ensure that all usage and the related revenues can be reconciled or verified to posted charges and that rates were set correctly during the rate review process. When a new rate is established, projected usage may be used in the initial rate. For the purposes of rate calculation, usage should include the usage by all clients of that service.
3.4. Use Rates to Non-Federal Clients
When the Service Center bills a federal client at the OF&AA approved rate for a service, the university also bills that client for indirect costs (F&A) in accordance with the contract governing the use of the service. Since Service Centers may not disadvantage federal clients, any external client (federal or non-federal) should be charged the OF&AA approved rate plus the appropriate F&A rate. In other words, the Service Center should bill all external clients at least the OF&AA approved rate plus F&A (minimum) in order to maintain compliance.
3.5. Annual Compliance Certification and Review
3.5.1 The Dean/Associate Vice Chancellors responsible for the Service Center will be required to certify that all Service Centers in their unit maintain compliance with University requirements.
3.5.2 Service Centers must complete Annual Rate Reviews and submit adjusted rate request forms to OF&AA if needed.
4. SERVICE CENTER AND COLLEGE/UNIT RESPONSIBILITIES
Service Centers with rates authorized to charge federal contract and grant projects or external federal clients are responsible for the following roles and obligations:
4.1. Submitting requests for new financial projects in accordance with all University procedures.
4.2. Requesting set up for new Service Centers as needed. This includes completing Rate Request forms for each type of new or existing service that will charge federal contract and grant projects or federal clients and route to OF&AA. The rate form(s) should be accurate and submitted timely (before a previously approved rate has expired). The use rates should include only allowable direct costs. Service Centers should use accurate historical data or solid projections in the development of service rates.
4.3. Billing appropriate rates to all clients. The guiding principle is that any federal or NC State internal entity must always receive the benefit of the lowest rate. If there is a question about the applicability of the lowest rate, contact OF&AA.
4.4. Ensuring that OF&AA has approved Service Center rate if there is any possibility it will offer services to any contract and grant activities in the future.
4.5. Monitoring Service Center expenses and utilization to ensure that approved rates continue to be accurate. If changes are necessary as a result of the reviews, the Service Center and College/Unit must submit new rates to OF&AA for review and final approval.
4.6. Ensuring Service Center usage is adequately documented through records such as daily logs.
4.7. Monitoring the accounting transactions to ensure the financial project is used only for the purpose approved and is not used to account for unrelated revenue or expenditures.
4.8. Monitoring billings to ensure federal contract and grant projects are charged the approved rates and external federal clients are charged the approved rates plus F&A.
4.9. Ensuring other users are not billed for the same service at a rate less than the approved rate including F&A.
4.10. Notifying OF&AA for any service that will no longer charge federal contract and grant projects so that the approved rate can be inactivated. It is the responsibility of the Service Center and College/Unit to take the necessary steps to ensure contract and grant projects are not subsequently charged.
4.11. Ensuring any other applicable procedures are followed with regards to the operations of the Service Center Facilities and associated financial projects.
4.12. Review the operations/financials of the Service Center annually. If, based on that review, changes are required, the unit should submit a new rate request to OF&AA.
4.13. Reviewing the Service Center project for any cash balance resulting from charges to internal and federal users. Service Centers should review their cash balance at least annually. The Service Center is responsible for correcting any excess cash balance through rate adjustments or other appropriate measures. The College/unit and 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 and notifying OF&AA so that a solution can be identified and documented.
5. OF&AA RESPONSIBILITIES
In order to promote efficient operational and business processes, OF&AA is responsible for the following:
5.1. Assisting Service Centers as requested by the Service Center director or administrator or others in the rate development process.
5.2. Reviewing, analyzing, and holding final approval for rate forms submitted by the Service Centers for compliance with Federal OMB Uniform Guidance, applicable North Carolina General Statutes, University Cost Accounting Standards and the University Policies, Regulations & Rules concerning Service Centers. The responsible Service Center personnel and business contact will be notified when the rate is approved by OF&AA.
5.3. Maintaining current Service Center use rate forms and the Service Center Manual.
5.4. Maintaining any associated guidance for Service Center operations on the OF&AA website and through communications to Service Center personnel.
5.5. Regularly providing Service Center training opportunities.