Implementation Guidelines for Establishing Service Centers and Recharge Centers

If a service is principally for external customers, the activity is not a Service Center. In such cases, there may be unrelated business income issues that should be reviewed with the Tax Department.

A cost/benefit analysis should be completed to ensure the Service Center is cost effective. It is unallowable to charge the government for a service that would cost less if purchased from an outside vendor. In some cases, an argument could be made about the convenience of allowing the more expensive service to be performed in-house, but that argument is rarely accepted by DHHS.

Before a Service Center is established, a determination should be made that all the costs are going to be billed to all customers.

In theory, whether a cost is charged directly or indirectly should have little impact on the total cost of a sponsored project.

However, because the university’s indirect cost rates are capped by the federal government it may be advantageous to charge certain costs directly (where there is a direct relationship identified) to the benefiting project or department.
However, our indirect cost rates are predetermined, based on the cost accounting structure in place at the time our indirect cost rate proposal was submitted to the Department of Health and Human Services (DHHS). Any change in our costing structure, such as changing a cost from indirect to direct, requires notification to DHHS and possible changes to our indirect cost rates.

All Service/Recharge centers are required to maintain separate organization number to facilitate consistency in estimating, accumulating and reporting costs specific to the Service Center.
 

The costs charged to Service Center organizations are restricted to direct and indirect cost incurred in connection with the Service Center operation and these costs must be in accordance with the purpose for which the Service Center has been established.

Service/Recharge Center managers are responsible for rate calculation and it should be developed in a way that revenue generated from billing should offset expenses over a reasonable period of time. The Service Center must retain all documentation supporting the rate calculation.

Service Center managers and finance directors must ensure that costs and revenues are reported accurately and consistently. Service Center’s financial performances must be evaluated annually to ascertain that there are no profits from its operations. Managers and finance directors must review Service Center billing rates periodically and adjust as conditions warrant in compliance with this policy. If a Service Center generates profit, the university Tax Department should be informed about any unrelated business income.

A separate rate must be calculated for each category of service.

Examples:

• Salaries and benefits of technical and other staff directly involved with operation of the service
• Materials and supplies
• Subcontracts, purchase services and professional fee
• Equipment lease or rental
• Maintenance and Repairs, machine supplies, including equipment maintenance agreements
• Other directly related expenses

Examples:

• Salaries and benefits of administrative staff not directly involved in providing the service, who support the Service Center (such as service center manager and scheduling staff)
• General office supplies
• Equipment
  • Equipment bought with federal funds must be excluded from the federal rate
  • Allowable costs include only the current year’s depreciation
• Debt Service
  • External interest may be charged with prior approval from the Office of the University Controller
  • Principal payments should not be included in billing rates as they are equity purchases, not current year expenses

Before including these costs, consult with the Associate Director, GCAS Strategy and Compliance. This includes cost such as:

• Facilities – General
  • Building and equipment depreciation (broad overhead not associated with the Service Center)
  • Interest
  • Operations and Maintenance
• Administrative
  • General and administration (e.g., President, EVP & CFO, Controller, Purchasing, Human Resource Management & Development, etc.)
  • Department Administration (e.g., Dean’s Office, Academic Department, Secretary)
  • Sponsored project administration (e.g., Office of the Vice President for Research, Grants & Contracts Accounting Services, and Health Research Compliance & Technology Transfer))
  • Student services (e.g., Student Affairs)

• Unallowable cost identified in OMB Uniform Guidance, (entertainment, bad debts, non-recruitment advertising, public relations, alcohol, etc.) must be excluded from rates.
• Any surplus or reserves to repay principal or interest or to fund future operations are unallowable.

• Allocations should be based on a causal and beneficial relationship between the costs and service provided
• Potential Allocation bases include:
  • Effort
  • Usage (time)
  • Costs
  • Space – square footage

All usage must be included, regardless of the user/customer and whether services will ultimately be billed.

Divide the total annual operating cost by the total estimated billing units to determine the billing rate per unit.

Examples:

• The billing unit for a Service Center that provides photocopies would be the number of copies.
• The billing unit for a Service Center which provides services would be the amount of hours of service.

• On an annual basis, revenues must be compared to the actual cost of providing each service.
• Surplus or deficits which exceed the established threshold should be used to adjust future billing rates or be credited back to users. The only exception to this rule is that to the extent that the rate charged to any category of non-federal users (e.g., commercial users) exceeds the projected unit cost of the service provided, the surplus generated by that excess may be retained as intended profit and need not be applied to reduce future rates to cost-based users.

Examples:

• Materials for resale needed for job
• Equipment lease or rental
• Repairs and machine supplies
• Other directly related

All usage must be included, regardless to whether discounts or free service is provided.

Divide the total annual operating cost by the total estimated billing units to determine the billing rate per unit.

• The billing unit for a recharge center that provides photocopies would be the number of copies
• The billing unit for a center which provides services would be the amount of hours of service

• Federal users must be charged no more than the cost-based rate. Profits are allowed on external users. Cost-based rates must be used for all GW users.
• Discounts provided to non-federal users must not be subsidized by federal users. The subsidy must be quantified and excluded from future billing rate calculations and the indirect cost rate.
• If market prices have been approved for use by DHHS, they should be compared to actual costs to ensure that the rates do not result in overcharges to federal users.