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Administrative Procedures Manual

Office of the Faculty Secretary

Mailing Address:

University of Idaho
875 Perimeter Drive MS 1106
Moscow, ID 83844-1106

Phone: 208-885-6151

Fax: 208-885-8947

Administrative Building

20.20 – Service Center Policies and Practices

Rewrite January 18, 2018

A. General: A service center is defined as a university departmental unit that provides goods or services to other units within the University. If the unit only provides infrastructure design services (i.e. engineering) and those services are never charged to any sponsored projects, then that activity is excluded from these policies. Services can range from highly specialized to routine in nature and the activity is ongoing, not a one-time distribution of expense. For service centers with gross revenue of $10,000 or more, a formal rate approval is required. This review is performed by the Cost Accounting Unit of the Office of Sponsored Programs. Forms required can be found at http://www.uidaho.edu/finance/service-centers. Unless operating under a long term agreement (LTA), a service center must operate on a break-even basis at the end of a twelve month period.

The cost of running the service center facility or providing the product is charged to users on a “rate” basis. Rates are generally formulated to recover the costs of operations such as salaries, benefits, equipment depreciation, materials, and supplies expense. (See C-1)

B. Definitions:

B-1. Auxiliary Service. A self-supporting entity that provides non-instructional support in the form of goods and services for a fee to students, alumni, faculty and staff acting in a personal capacity. The general public may be served incidentally. Auxiliary services are not subject to service center policies and will not be reviewed by the Service Center Team.

Examples: Housing, dining, parking services, and ticket sales

B-2. Local Service Account (LSA). Activities established primarily to provide non-instructional service beneficial to individuals and groups external to the institution, although services may also be provided to internal clients, i.e., faculty, staff, and students. Included in these types of activities are non-instructional community service programs, broadcasting services, and cooperative extension services. Local service accounts are not subject to service center policies, and will not be reviewed by the Service Center Team. However, LSAs are required to prepare and retain annual rate calculation information in the case of an audit.

Examples: Seed sales, Crop sales

B-3. Long Term Agreement (LTA). Because of its unique nature, a LTA center requires longer than 12 months to recover its operating costs. Examples of circumstances that might require a service operation under an LTA include: initial large capital equipment and building costs, volume fluctuations, or market limitations on annual rate increases. A LTA must be approved by the OSP Service Center Team, the budget office, controller, and unit administration. Service centers operating under an LTA are not exempt from annual rate performance reviews.

B-4. Recharge Center. A type of service center with annual expenditures less than $10,000 that exists principally to provide goods and services to UI units. A recharge center may have a limited number of users outside the department. Due to their smaller size of operations, recharge centers are not required to obtain rate approval from the Service Center Team as documented within this policy. However recharge centers are still expected to use the same methodology outlined in this policy to establish their rates as they are subject to internal and external audits. The responsibility for a recharge center’s compliance with federal and university regulations falls upon the senior executive of the unit.

Examples: Departmental copier and fax machine services

B-5. Specialized Service Center. A type of service center defined in 2CFR Part 200 Subpart E § 200.468 as highly complex or specialized facilities. Billing rates for specialized service facilities should include service center costs, institutional overhead costs, and general administrative costs. Specialized service centers should meet all of the following criteria:

a. The facility incurs substantial annual expenditures and charge out volume, approximately $1 million or greater, or has significant charges to federal funds.
b. Treatment of its indirect cost within the service center rate rather than as part of overhead pool, would materially affect the university-wide overhead rate.
c. Its services should not be easily available from external vendors, e.g. Wind tunnels, glassblowing, and analytical testing

B-6. University-Wide Service Center. A type of service center that is larger than a recharge center and that provides a specific service or product, or a group of services or products, to users principally within the UI academic and administrative community. This type of service center generally recovers more than $10,000 in annual operating expenses. Examples of University-Wide Service Centers include, Chemistry storeroom, Animal Care Unit, and unit motor pool.

C. Service Center Policies: These policies have been developed to ensure compliance with federal cost principles for educational institutions contained in the Office of Management and Budget (OMB)Uniform Guidance which can be found at 2 CFR 200. The cost principles establish guidelines regarding allowable and allocable costs that may be recovered on federal grants and contracts, including costs associated with service center activities.

C-1. Service Center Rates. Rates must be based upon allowable costs incurred by the service center and accounted for in the related budgets. The rates should be stated in measurable units of goods or services, based on reasonable annual estimates. They must be non-discriminatory, and calculated on a break-even basis (i.e. revenues should roughly equal expenditures). Any fund balances under or over the break-even point will be included as a rate adjustment during the next fiscal year. Rates must be applied consistently. If different rates are applied to different users, then federal grants must receive the lowest rate. A carry forward balance of approximately 15% is allowable and considered to be break-even.

C-2. Facilities & Administrative (F&A) or Indirect Costs. A service center may not include F&A rates when determining the rate charged to internal users. The University’s financial system generates an overhead component on grant expenses, based upon the specific F&A rate of each award. Since internal users of service centers are predominantly grant funded, incorporating indirect charges into a service center rate would create a double charging situation with indirect costs to federal funds. (Note: A specialized service center is an exception and may recover indirect costs from its users.) The service center rate spreadsheets developed by the Service Center Team automatically includes indirect rates in the rate calculation for external users.

C-3. Unallowable Costs. Unallowable costs may not be budgeted or expensed by service centers because service centers often charge a significant part of their business to federally sponsored grants/contracts. Items explicitly disallowed by OMB’s uniform guidance include but are not limited to:

a. Entertainment costs
b. Bad Debts
c. Advertising
d. Public relations
e. Donations and contributions
f. Alcoholic beverages
g. Goods or services for personal use
h. Fines and penalties resulting from violations of federal, state, or local laws and regulations

C-4. Guarantee Account. All service centers must have a “guarantee account” that is designated by the unit responsible for the service center. This account is a “guarantee” for the payment of unrecovered service center expense if the service center budget has a deficit at fiscal year-end that exceeds 15% of operating expenses, or will not be recovered through an increase in the succeeding year’s rate.

C-5. Billing Period. Billing for services must be completed consistently and in a timely manner to ensure income is appropriately matched with costs incurred to perform the service.

C-6. External Users. At a minimum, external users will be charged for the full direct costs of the service unit operation. Sales tax, when applicable must be charged to all external users who do not provide tax-exempt certificates. (See APM 20.11) If external users make up more than 20% of a service center’s revenue, a separate account for external users must be established. Charges to external users may result in unrelated business income tax for the university.

C-7. Surplus Operating Funds. Service centers that have accumulated surplus funds, may not transfer these funds out of the service center operating account to reduce the balance. The balance must be carried forward and used to adjust subsequent billing rates.

C-8. Capital Equipment Replacement Reserves. A separate budget must be set-up if depreciation is an element of the calculated billing rate. The unit is responsible for setting this up according to UI procedures with the help of General Accounting. An annual transfer of depreciation expense recovered is made into the 5K or > capital outlay budget category. All capital outlay must be made from this separate budget. See D-8 for additional information.

C-9. Records Retention. Service centers are subject to periodic review by the OSP Service Center Team, UI’s Internal Audit department and external auditors who may audit to evaluate compliance with established UI and federal policies and accounting practices. Therefore service center activities must be adequately documented and records maintained to support expenditures, billings, and cost transfers. (See APM 65.02)

D. Operations and Controls.

D-1. Unit Administrators (i.e. Directors of Research Institutes, Deans, etc.). It is the responsibility of the unit administrator to:

a. Review and approve of all new service center requests prior to final submission to Service Center Team.
b. Review and approve of annual rate renewal calculations.
c. Ensure all financial activity associated with the service center is in compliance with all state and federal cost accounting regulations and UI policies and procedures.
d. Research and resolve all audit findings related to the service center e. Monitor financial position with respect to break-even policies.

D-2. Service Center Manager. The service center manager is responsible for the day to day operations of the service center. The manager assures that:

a. An annual billing rate proposal with all supporting documentation is submitted to the ui-service-centers@uidaho.edu and is available upon request.
b. Periodic review of the service center financial position in respect to break-even status is performed to allow for the annual adjustment of billing rates.
c. All equipment for which depreciation costs are built-in to the billing rates are identified as service center equipment for Asset Accounting is informed.
d. Identify service center space and report changes to Facilities and Office of Sponsored Programs for the purpose of space survey and F&A rate proposal.
e. The approved billing rate schedule is applied uniformly to all customers.
f. Billings are charged out in a timely manner and adequately documented.
g. Receivables are controlled and reconciled.
h. Records and supporting documentation are maintained as long as the grants and/or contracts that they charge remain subject to audit, in accordance with the UI record retention policies.

D-3. OSP Service Center Team: The Service Center Team is responsible for:

a. Interpreting and applying this policy.
b. Providing assistance and guidance to service center personnel who are providing the initial or annual rate review.
c. Reviewing all rates annually whose rate calculation and documentation must be approved by the OSP director and the UI controller.

D-4. Controller. Provides final approval/disapproval of rates.

D-5. Asset Accounting. Asset accounting staff maintains asset depreciation calculations and provides required detail for depreciable assets to service centers for incorporation in the billing rate development.

D-6. Separate Accounting. All service centers are required to maintain accounts that are segregated and detailed to facilitate the financial reviews required by this policy.

D-7. Billing Procedures. Billing must be based upon measured and documented utilization which is properly authorized for the account charged. All billing must be processed on a timely basis at established service center rates. The service center must retain documentation to support all charges, including documentation of expenses and usage.

D-8. Capital Replacement Fund. A separate capital replacement fund must be established to account for all capital related additions and expenditures being recovered by service centers. The service center team will complete an annual budget transfer from the service center’s operating budget to its repair and replacement budget. Transfers will be based on the amount of revenue directly related to capital depreciation charged through the rate. Although replacement accounts will belong to the service centers they must be used solely for service center related capital acquisitions. Contact general accounting at gnrlacctg@uidaho.edu or view their website for assistance in establishing capital replacement funds.

D-9. Service Center Review and Rate Adjustments. The OSP Service Center Team has established a schedule for annual review and rate adjustments which is posted on the service center website at https://www.uidaho.edu/finance/service-centers . Service center rates are in effect immediately upon approval. If necessary, rates may be reviewed mid-year and adjusted in order to comply with break-even requirements; the approval of the OSP Service Center Team and UI Controller is necessary for any adjustments.

D-10. Grant Expenditure Review of Service Center Charges. It is unallowable to charge sponsored projects for services from an unapproved service center. OSP reviews these expenses monthly and will insist on any charges being removed from the project if they are from an unapproved center. A list of approved centers will be on the Service Center website so that those responsible for grant expenditures will know if the charge is from an approved center prior to using the service. This list will be updated regularly by the Service Center Team.

E. Contacts: OSP’s Service Center Team can be contacted with any questions regarding service centers at ui-service-centers@uidaho.edu or 885-6651. Be sure to check the website for FAQs and needed forms, etc. at https://www.uidaho.edu/finance/service-centers.

Administrative Procedures Manual

Office of the Faculty Secretary

Mailing Address:

University of Idaho
875 Perimeter Drive MS 1106
Moscow, ID 83844-1106

Phone: 208-885-6151

Fax: 208-885-8947

Administrative Building