2.2 Operating Practices
These are the steps necessary to establish and operate a service center throughout a fiscal year. Variations are noted for the administrative service centers, and for the academic stores service centers which are operated on a calendar year basis.
1. Establishing a Service Center
A proposal to establish a new service center should be directed to the RAPC Service Centers Manager. This is often done after a department administrator discusses the logic and feasibility of the proposed service center with the RAPC Service Centers Manager. Such discussions help RAPC to understand the mission of the new center, and the department to understand its new role and responsibilities. Proposals to establish a new service center should be submitted to RAPC at least two months before the proposed start date.
A proposal to establish a new service center must contain the following information:
- The service center award, project and tasks names as they will appear on the expenditure, revenue, or operating statements;
- A description of the product(s) or service(s) to be provided, and the potential users (internal and external);
- An explanation as to how the service center rate(s) will be determined, including:
- a detailed annual expense budget, by expenditure type (including FTE with salary data) for the proposed service center
- a description of the activity base, its appropriateness, and the projected level of activity for the first year of operation
- the rate calculation(s) using the proposed budget amount(s) and the projected level(s) of activity for the first year of operation. A guarantee PTA which has been committed to cover year-end deficits if they occur (required for academic service centers only)
- The name, title, and phone number of the individual(s) delegated responsibility by the department chairman, or administrative equivalent, for the service center's financial affairs;
- Submit a list of all of the capital assets already purchased that will be used in the service center. The list should contain a description, PO number and SU property tag. A title vest search will be conducted by PMO in order to verify that the equipment may be used in a service center. This list is for capital assets already purchased which will now be used in the new service center. If a PO is in process for assets to be used in the center, the PO should be listed as well.
- Provide the signatures of the department chairman and school dean, or their administrative equivalents, indicating the department's acceptance of financial and operational responsibility for the service center.
In "related items" below is a form which may be used to submit the initial service center proposal for review and approval. Other formats may be used as long as the necessary information and approval signatures are provided. A new service center will not be established until signed proposals are received, reviewed, and approved by RAPC.
After the service center proposal is reviewed and approved by RAPC or CMA, RAPC will open a PTA for the new service center.
The RAPC Service Centers Manager then sends notice of the new service center's establishment, its approved rates, and a copy of its initial budget proposal to Stanford's cognizant Federal agency, the ONR. Copies of this letter are sent to the Defense Contract Audit Agency (DCAA), and the service center's department contact.
Note: If a new service center is established in the latter half of a fiscal year, the initial budget and breakeven period may be set for longer than twelve months, to allow the service center time to get itself up and running, and to then be on a fiscal year breakeven period. For example, a service center established in March 2004 could budget and set rates initially for the period through August 2005, and would not be subject to the +/-% breakeven requirement until August 2005. The center would submit an 18 month budget, the center should check budget/forecast amounts at least every quarter.
2. Service Center Cost Components
Following are some general guidelines for the various types of costs which can be charged to a service center to support its activities. Generally, all costs directly associated with the service center's operation should be charged to the service center. However, costs which are unallowable for government costing purposes may not be charged to the academic service centers or the VSC. Therefore, if any unallowable costs are posted to the service center PTA, the center should transfer these costs to their operating, gift, unrestricted PTA as soon as possible. Transfers are reviewed for their timeliness, do not wait until year end to transfer or exceed the “within two months of the end academic quarter” rule, see Admin Guide Memo 38.
Service centers must inform RAPC of any planned operating or equipment subsidies when submitting annual rates and budgets.
A. Personnel Costs
Salaries and the appropriate benefit rate of the service center employees, including lab technicians, machine operators, contingent labor, and other personnel directly involved with the activity of the service center, should be budgeted and charged to the service center. FTE data should accompany budgeted salary data in the annual budget submitted to RAPC.
Administrative staff supporting service center operations should be charged to the center if such support represents 20% or more of that individual's time. Smaller percentages may be charged to the center at the department's discretion. The department should be prepared to provide documentation of that support effort to satisfy audit requirements.
In addition, if a significant portion of salary expense is composed of “overtime” the service center should consult with their RAPC financial analyst to develop a separate “overtime” rate. "Significant" would be in the approximate range of 20% of total salary.
B. Supplies and Materials
The cost of supplies and materials needed to operate the service center should be charged to the center. These costs could include office supplies, special conferences related specifically to the service center, professional services, and technical supplies. While volume discounts and economies of scale may make it prudent to order some supplies in large quantities, goods should not be "stockpiled." Rather, purchase of goods should be reasonably matched with usage.
Other operating expenses which may be included in service center rates are rental and service contracts, equipment operating leases, and professional services. Valid expenses also include charges from another service center.
C. Departmental Stores Service Center Inventories
If the service center operates to supply a product, i.e. the departmental stores centers, the goods purchased for resale will be charged to its Project/Award and the inventory object code 11405. Service center managers will be offsetting their inventory balance via their allocation journals which will also post sales tax recovery and the center’s income.
Only the operating costs required ordering, receiving, and delivering these purchased items are included in the service center account and in the calculation of the service center's breakeven position. The accounting for this type of sale is slightly different than normal service center sales.
D. Capital Equipment (Assets)
Service centers must manage and account for capital equipment used in the centers in accordance with the procedures discussed below. These procedures have been developed to ensure compliance with federal regulations regarding the treatment of capital equipment. Although federal regulations do not allow the purchase cost of a capital item to be a direct charge to a service center, it is appropriate to charge the center for the depreciation (or principal portion of debt repayment) or lease cost associated with equipment.
1. Property Administration
The guidelines set forth by Property Management Office (PMO) in the Property Administration Manual should be followed when purchasing service center equipment. Additionally, the equipment must be clearly identified as a service center asset by proper notation in the purchasing requisition document and in Sunflower as discussed below.
All service center equipment must be identified in the Fixed Asset (FA) Module via Sunflower. Sunflower is being used for both financial and governmental reporting purposes. CMA will use Sunflower/FA to calculate equipment depreciation expenses which are allocable to Federal awards. Therefore, all service center assets, regardless of funding source, must be properly identified in Sunflower/FA as a service center asset.
Sunflower includes several fields of information for each asset, including the following: tag number, asset description, location, acquisition account, department organization code, and various other fields. Of particular importance to service centers is the department organization code, which identifies the department which is using the equipment. PMO has established a unique department code in FA for each service center or grouped service centers.
PMO maintains a master list of all of the Department Property Administrators (DPAs) including those that are associated with the service centers. Service center managers must work with their respective DPAs to ensure that their service center department organization code is properly identified to their assets in Sunflower. CMA will use these department codes to identify and exclude service center assets from F&A costs allocated to Federal awards.
2. Funding of Service Center Assets
As noted above, federal guidelines do not allow the purchase cost of a capital item to be a direct charge to a center. However, depreciation on service center assets may be charged to the service center. Therefore, service centers are required to finance equipment purchases with departmental gift funds or through University Capital Accounting. Refer to Administrative Guide Memo 53.
If the center is interested in obtaining University loan funding they must obtain approval from Capital Projects and Management (CP&M).
After approval has been granted by CP&M, Capital Accounting will establish amortization entries in the General Accounting system to charge the center for the principal portion of the debt repayment. The amortization period for financed assets is set equal to the useful life of the asset. The debt amortization is thereby equal to the annual depreciation expense for the asset. The asset categories and useful lives for all University assets are included in Memo 53.
Service center assets acquired with Operating Budget funds, as well as any other assets used by the center, must be identified as service center assets in Sunflower. (See discussion in the Property Administration section above.) Government and non-Government funded equipment cannot be depreciated through a service center.
More importantly, federally-funded equipment, even if title is with the University, cannot be used in a service center unless specifically allowed by the Government sponsor. The service center manager should contact their DPA if use of Government funded equipment is contemplated in a service center.
Departments may choose to subsidize service center equipment (i.e., purchase equipment with unrestricted department funds and not charge the center for depreciation). This equipment must still be identified as a service center asset (by department code) in Sunflower. It is vital that the equipment is not included in the equipment depreciation cost pool for F&A rate cost studies or proposals.
3. Interest on Debt Funded Equipment
The interest associated with the debt for financed equipment which costs $10,000 or more is allowable per federal regulations. The University has decreed that although the interest on assets financed from FY05 forward is automatically allowable, interest on asset financed prior to FY05 are not. Therefore, unless the service center prior to FY05 interest on specific capital assets paid to an external party associated with debt for new equipment costing $10,000 or more was agreed to be allowable by the ONR interest is unallowable.
Service center managers should contact Capital Planning & Management CP&M if they wish to purchase equipment using debt through University external financing.
Interest will not be charged if the equipment funds are obtained from the center’s department’s gift or unrestricted funds. It is only when the center requires the use of external financing that interest is required. Contact Capital Accounting to see if they are willing to post the monthly amortization payment to the department’s gift account and if not, the department should post the monthly depreciation journal.
Starting in FY04, Capital Accounting has begun charging a markup fee for utilizing the University’s finances. This unallowable markup can not be posted to an academic or the VSC service center. Therefore for the unallowable markup fee the service center should provide Capital Accounting with an unrestricted or gift PTA.
4. Asset Categories and Depreciable Lives
Depreciation is an accounting term which recognizes that a capital equipment asset's value is spread out over a period of useful life, or benefit. The asset is "consumed" over an extended period of time, typically several years. This period is called the useful life of the asset. The following list of asset classifications and useful lives are limited to Stanford assets typically required in a service center.
|Asset Category||Depreciable Life|
|Computer Equipment||3 years|
|Scientific/Technical Equipment||5 years|
|Data Handling Equipment||5 years|
|Standard Telecommunications Equipment||5 years|
|Major Software Systems (>$500,000 capitalization), not including capital equipment hardware||10 years|
|Shop Machinery and Tools||10 years|
|Office Furniture & Equipment||10 years|
|Complex Telecommunications Equipment||10 years|
Service center equipment depreciation is calculated on a monthly straight-line basis, and begins the month after the asset is put into service. The cost of the equipment is divided by its useful life to determine each month's or year's depreciation expense. The entry made to recognize this use for a service center is:
- Debit - Service Center PTA 58665 - SU Internal Principal Amortization
- Credit - Original PTA for funding for the equipment (the Capital Accounting financing PTA, or the department's gift or unrestricted PTA used for the purchase of the asset)
By the end of the equipment's useful life, the source that funded the purchase of the acquired equipment has been "repaid" by the service center through "amortization" entries.
If the asset was purchased in FY05 forward with University financing, there will also be an external loan interest allowable charge which can be allocated to the service center users in the rates.
Note: For assets not shown, please call Capital Accounting or refer to Admin Guide Memo 53.
5. Donated Equipment
An equipment donation is considered to be the equivalent economically of a cash donation which is subsequently used to purchase equipment. When a service center receives an equipment donation, it may be depreciated through the service center, or recorded in a departmental gift account. In either case, the donated asset must be properly identified by the DPA as a service center asset. (See discussion in the “Property Administration” section above.)
If donated capital equipment is acquired for use in a service center, refer to the Property Administration Manual for instructions on recording the asset in the Sunflower, booking the value, and gathering the required supporting documentation. For additional information on the treatment of donated Capital Assets please refer to Exhibit J: Capital Assets.
For equipment depreciation indirect cost purposes, the useful life for all non-service center assets acquired prior to FY97 was as follows: assets acquired through FY82 are depreciated over 15 years; assets acquired from FY83 through FY92 are depreciated over 10 years, and assets acquired from FY93 through FY96 are depreciated over 8 years.
If equipment is financed (purchased using the Capital Accounting PTA), a sinking fund account is credited for the "depreciation." If equipment was purchased using non Operating Budget department funds (a gift or unrestricted PTA), that gift or unrestricted PTA is credited.
Technically, this is an "amortization" charge, a paying off of the loan of funds used to purchase the asset. For service centers, the amortization (repayment of the loan) schedule is matched to the life of the asset (its depreciation schedule).
E. Facilities & Administrative (F&A) - Indirect Costs
A service center will usually not be charged for its campus-provided O&M services, or for its utility consumption; these are indirect costs. However, if a service center is an extraordinary user of a utility, it will be charged for that consumption, so that its "above normal" usage cost is passed on directly to its users. The ITSS Data Center, with its mainframe computers, is charged directly for its use of electricity and chilled water due to its heavy demand for those utilities.
A service center will generally not be charged for the cost of its space-depreciation and debt service-except as explained in Section 5 which follows. Nor will a service center be charged for University General and Administrative ("G&A") or other indirect costs.
A Specialized Service Facility Service Center is an exception to the above. Appropriate indirect costs will be allocated to such a Facility, and must be recovered from its users.
F. Capital Project Costs/Specialized Purpose Building Component
A "specialized purpose building component" is that component of a building which is above and beyond the normal requirements for office or lab space and which is specifically built to meet the requirements of the service center. Examples of a specialized purpose component include the raised floors for the ITSS Data Center, the special air handling requirements for the Veterinary Service Center's Research Animal Facility, and the University’s Utilities’ infrastructure systems.
Generally, building costs should not be charged directly to a service center. However, the depreciation and/or debt service for a specialized purpose building component may be charged directly to a service center. This type of expenditure is rare, and must be dealt with on an individual basis. Service center managers should contact RAPC if they anticipate this type of expenditure for their service center operation.
G. Prior Year Balance
If an annual breakeven service center's year-end net balance is within the required 5% or 15% of its net operating expenditures, this amount (the net overrecovery or underrecovery) automatically becomes a component of the service center's next year fiscal position, and should be factored into its rate setting for that year. A prior year overrecovery will reduce the next year's expenditure level; a prior year underrecovery will increase the next year's expenditure level for purposes of rate setting and of that year's +/- % calculation.
From September 1, 2004 forward the PYB for all service centers is recorded as a +/- amount associated with object code 30001. The amount may not be adjusted during a fiscal year, unless it is with General Accounting’s approval and their effort.
When running specific Oracle reports based on the award/fund parameter the PYB will be listed for the award/fund in project 1000000 for each service center.
The PYB amount is used for the calculation of +/- 5% or +/- 15% breakeven.
3. Service Center Rate Determination
A. General Rate Calculation
In its simplest form, or for a one product service center, a service center's rate is cost-based. Users are allocated a share of service center costs based on their relative use of service center products or services. A single, unitized cost rate (cost per unit of output) is used to recover the expense of providing a product or service. This rate is calculated by dividing the total budgeted cost for providing the product or service by the total projected level of activity for the budget period.
Total Budgeted Expense equals all costs directly associated with a service center’s operations.
Projected Level of Activity is the total estimated volume of work to be performed in a service center, expressed as labor or machine hours, CPU time, or units of products or services to be provided. This is the denominator to be used in the calculation of the service center rate, as shown below. The actual level of activity multiplied by the service center rate determines the amount to be charged to each user.
Total Budgeted Expense
(Plus Prior Year Underrecovery, or Minus Prior Year Overrecovery)
Rate = ____________________________
Total Projected Level of Activity for the Budget Period
While most service center rates will be cost based for each specific service or product, a service center offering multiple related services.
or products may establish rates for a variety of services that, in aggregate, recover the total costs of the center.
Rates are normally calculated on an annual basis for each fiscal year. Adjustments may be made as needed during the year to accommodate changing circumstances and to ensure year-end breakeven within the “+/- 5% or +/-15%”.
In some instances, rates based on considerations other than costs may be used where warranted and approved by RAPC. In such cases, policies regarding full costing, overall breakeven, and non-discriminatory pricing must still be adhered to.
B. Alternative Rate Structures
Some service centers may experience special circumstances which call for rates utilizing an approach different from the general rate calculation. Tailored rate structures or pricing mechanisms may be used as described below, but only if the resulting rates are non-discriminatory with respect to specific classes of users, e.g., Organized Research.
1. Subsidized Rates
For various reasons, a department may wish to have its service center charge its users less than fully costed rates; and may choose to subsidize center operations with operating budget or other unrestricted funds. In these circumstances, a center should first calculate a fully costed rate in accordance with the “General Rate Calculation” discussed above. A percentage discount can then be applied to the fully costed rate to derive the desired subsidized rate to be used throughout the year. Subsidized rates must be consistently charged to all internal university center users. External users should be charged the fully costed rate(s).
Throughout the fiscal year, all service center expenses must still be charged to the service center account. At the end of the year, the net year-end balance should be evaluated in accordance with the breakeven policies contained in this manual.
2. Stores Service Center Rates
A stores service center rate is determined by dividing its administrative or operating costs by its projected cost of goods sold. Its rate is, therefore, a markup percentage on the cost of goods sold.
The stores service centers will generally incur a low percentage of inventory loss as a normal course of business. 24 hour “self-service”, illegible or incomplete log sheets, closed sponsored accounts, etc. will cause a percentage of inventory loss. The percent of loss is calculated by dividing “Amount of Loss” by “Cost of Goods Sold” and the annual amount should be within 10%. If the inventory loss is more than 10%, the guarantee account should be charged for the inventory loss amount.
3. Time-of-Day Rates
Service centers that have a wide fluctuation in usage during the day may establish a time-of-day rate structure. Higher rates may be charged during hours of peak use, "prime time," to provide incentives to reduce the demand for services during these times. This structure helps all users by improving performance during peak hours and encouraging the utilization of off-peak hours, thereby reducing the cost for additional equipment. This structure should also encourage an increase in volume which should help keep rates low since expenses will be divided over a greater number of users.
Service centers utilizing a time-of-day rate structure must show that all users have an opportunity to use the center during non-peak hours and that no particular user, especially Organized Research, is disadvantaged by the proposed rate structure. This type of rate structure is used most frequently in computer and communications service centers and also with use of scientific equipment such as magnets for magnetic resonance imaging (MRIs).
4. Computer Shares Rates
Computer facilities may charge users based on the computer "shares" concept. The computer capacity is divided into shares, gigabytes, etc and users purchase shares/bytes necessary to meet their computing requirements.
5. Market-based Pricing
In some instances, analysis of a service center's sales may show that its products or services are sold in substantial quantities both to Stanford users and to the general public. In such cases, federal regulations permit the use of established catalog or market prices, if approved by the cognizant government agency. In other instances, a service center such as a stores or copy center may provide services similar to providers external to Stanford. Because of competitive pricing levels, a service center may be able to charge only what the market will bear for one or more of its products or services. When using market-based pricing, the service center must still comply with the non-discrimination and overall breakeven requirements.
Also, market-based prices can not exceed the actual cost of providing the service(s) in total. Therefore, as long as the service center breaks even in total some rates may be priced above actual cost while others are below cost. Remember to charge all users the same rates do not discriminate between them, i.e. sponsored users vs. department users.
6. Volume Discounting
Sometimes economies of scale dictate that a large quantity of a product or service can be provided to a customer at a lower overall cost than the normal per unit rate. Such a volume discount is allowed as long as it is 1) disclosed and justified in the service center's proposed budget and rates; and 2) its effect is not discriminatory to a single type of customer, other than by amount of product or service provided.
7. Other Rates
Other cost/rate structures to meet specific service center needs may be approved by RAPC, but must be in compliance with federal regulations
4. Annual Requirements for Service Centers
A. Budget and Rate Submission
1. Submission Dates
Each year, a service center's proposed budget and rate(s) must be submitted to RAPC/CMA between August 1st and September 30th. 12 Even if the service center is not changing its rate(s), a new proposed budget supporting that rate must be submitted for the upcoming fiscal year. Rate approvals are usually specified on a fiscal year basis, i.e., "September 1, 20015 through August 31, 2016."
The large scale Administrative service center budgets are utilized by the Budget Office. These centers generally submit their operational budgets to the Budget Offices database system in the first part of August.
2. Submission Requirements
The annual budget and rate submission should include the following:
- Service Center Budget. The budget must include the total operating costs of the center, even if some costs will be subsidized with other unrestricted funds. The budget should include line items for the various service center cost components (as relevant) by expenditure type where possible.
- Service Center Rate(s). All rates used by a center must be submitted to RAPC and disclosed to the Government. If subsidized rates will be charged, both the fully costed rates and the subsidized rates must be submitted to RAPC:
- Service Center Revenues. Projected by estimated usage of service(s) to be provided.
- Subsidies. A center must identify any departmental subsidies anticipated to be used to augment the center’s budgeted income. (Use of equipment within the service center that is not financed and depreciated to the service center is also a subsidy. These assets should be identified in Sunflower.)
- External Users. Anticipated sales to external users must be identified in the budget submission.
When August income and expense are fairly well-known, service centers should strive to submit their budgets and rates to RAPC/CMA as early as possible in August. When this is not the case, service center budgets should be submitted by the end of September.
3. RAPC Review and Approval
It is RAPC’s goal to have all service center proposed budgets reviewed and new rates approved by the end of November. Notice of RAPC's review and approval of rates is sent to the University's cognizant Government agency, the Office of Naval Research (ONR); with copies to the Defense Contract Audit Agency (DCAA), the responsible individuals in the service center's department, and school and/or department heads/financial management.
If RAPC's review and approval has not been completed, a service center's new, proposed rate(s) may be used for the new fiscal year billings. If any problems which affect the rate(s) are then uncovered in the RAPC review process, these billings must be adjusted, to reflect the actual rates approved.
B. Service Center Status Review
1. Review Procedures
Service center managers are expected to evaluate their service center's activity each month, for the following:
- to determine accuracy of billings and expenses charged (including that the proper, approved rates were used to charge)
- to remove any unallowable costs charged to an academic service center to an operating budget or gift account/remove any unallowable costs not associated with capital assets posted to an administrative service center by transferring to an operating budget or gift account
- to assess each month's effect on the budget and projected year-end breakeven position
RAPC/CMA may perform a cursory review of service center income and expense on a monthly basis in the early part of the new fiscal year. RAPC/CMA conducts a detailed, comprehensive mid-year review of the performance of each service center, to identify any problems early and to help ensure that all centers will breakeven by the end of the year. Mid year review data is followed up on and is updated thereafter with review and analysis (as needed) of monthly service center data to fiscal year end.
2. Rate Adjustments
A request to change a service center rate should be made as soon as it appears that the service center will not breakeven at year-end using the previously approved rate. Such requests should be routed to RAPC/CMA for review and approval before the new rate is used.
A request for a rate change must include a revised income and expense budget, an estimate of the level of activity anticipated during the revised budget period, and an explanation of the reason(s) for the changes in budget and rate(s).
If the rate revision results from a prospective change in either services provided or operations, then the rate change may be prospective only. Otherwise, the rate change should be retroactive to the beginning of the fiscal year (to ensure that each individual service center user is only charged his fair proportionate share for total service center usage during the year). Over-recovery in excess of 15% at the time of re-budgeting must be refunded proportionately to all academic service center users billed at the original rates. Under-recovery in excess of 15% must be charged proportionately to all academic service center users, or offset against the center’s guarantee account. When adjusting rates mid-year, academic service centers must rebate/recover such that the net balance is within +/-15%. Centers may refund or recover to a zero net balance, at their discretion, at mid year.
Notification of RAPC's review and approval of the revised budget and rate and its effective date is sent to the same distribution as the original rate approval letter.
3. New Service Rate Request
If an established service center is requesting a rate for new service please refer to the New Service Rate Request Form in "related items" below. If you are requesting a new service rate after already submitting your center’s rates for the year, include a revised total service center budget to show you will breakeven at year end.
C. Breakeven Calculation
The +/- 5% or +/- 15% breakeven position is calculated as follows:
(Operating Income - Operating Expense)
____________________________+/- PYB / Total Exp +/- PYB Operating Expense
The current year's net balance equals a service center's year to date (YTD): YTD revenue less its YTD expense, plus or minus the prior year balance carryforward (PYB).
The prior year balance carryforward may be zero, positive, or negative. If the prior year balance is an over-recovery, it will reduce current year expense; if it is an under-recovery, it will increase the current year expense base for +/- 5% or +/- 15% breakeven calculation purposes.
The percentage of over- or under-recovery experienced to date equals the net balance divided by the YTD expense plus or minus the PYB. Examples of breakeven calculations are provided in Exhibit B.
Service centers having multiple accounts for management purposes, but operating within the same organizational entity, may have these accounts' income and expenses "rolled up" combined for the purpose of the +/- 5% or +/- 15% breakeven calculation. Examples of this are the administrative centers: O&M Shops and Utilities. Or the academic centers: Veterinary Service Center (allowed to breakeven on the subtotal of their various PTAs i.e. animal feed PTA, animal supplies PTA, etc. but it is not allowed to break even based on species subsidizing – it is unallowable to charge more for mice per diem to subsidize large dog per diem). Another service center is the Protein and Nucleic Acid Facility which has multiple services/rates for “Protein Sequencing” all of which should subtotal to within +/- 15%.
D. Fiscal Year-end Close
In July - August via e-mail, RAPC distributes to each service center manager a memo that discusses the closing process and calendar for that fiscal year end. The memo will also be posted on the service center webpage. General closing process responsibilities are discussed below.
1. Service Center Responsibilities
Complete 12th month billing: In order to most appropriately match costs with revenues, it is important to have each month's income billed to the service center's users by the accounting close of that month. This is especially important at fiscal year-end when the service center needs to ensure that its twelve months of expense are matched with its twelve months of income. It is also important to have any adjustments to service center expense made by fiscal year- end.
Unallowable costs: No unallowable costs or activities should be included in an academic department, service center account. Each center manager must review the center accounts for unallowable costs or activities, and transfer the expense to an appropriate non-service center account. Administrative service centers are currently only allowed to include certain specific unallowable costs associated with their capital assets in their rates. These centers should review all of their costs for general appropriateness as fiscal year-end approaches.
Breakeven review: Each manager should estimate his service center’s breakeven percentage prior to year-end. Service center recoveries exceeding the +/- 5% or +/- 15% should be resolved in accordance with section V.E. Service center managers should discuss the proposed resolution of recoveries exceeding +/- 5% or +/- 15% with RAPC, and inform RAPC/CMA with the iJournal numbers which correct these situations.
2. RAPC Review
Academic Service Centers
During the closing of the twelfth month, RAPC reviews a preliminary report for the academic service center accounts. Each service center is reviewed a final time for unallowable costs, any other activity problems noted during the year, and to confirm the +/- 15% breakeven position.
If RAPC's review discloses any problems, the service center manager is consulted and corrects the problem. Corrective actions include the following:
- transferring an unallowable cost off the service center account;
- completing billings for twelve months of service center usage;
- refunding a greater than 15% overrecovery, in total, to all users proportionately;
- funding a greater than 15% loss, in total, from the guarantee account or by charging it out to all users proportionate to their fiscal year use.
The year end process has been determined and Exhibit F has been updated with year end close deadlines. Academic service centers will need to run their own online reports to determine if hard close entries will be required. Hard close statements will be printed and distributed to the service centers.
Administrative Service Centers
The administrative service centers year end balances will be rolled up to the Award/Fund level. Given the larger operational scope and nature of these service centers, hard close entries are often necessary to record and correct expenses after soft close figures are known. RAPC/CMA analysts review both soft close and hard close administrative service center Reportmart statements for possible problems, and for +/- 5% breakeven. Final adjustments must be made in hard close. Hard close statements will be printed and distributed to service centers.
Occasionally, extraordinary or unusual circumstances may cause a service center to unexpectedly end the fiscal year outside the +/- 5% breakeven position. The reasons must be made known to RAPC. Lack of regular, normal departmental managerial oversight is not an acceptable reason to allow non-conformance to the +/- 5% breakeven requirement.
If RAPC determines that the service center could not reasonably have adjusted its expenses or rates in time to achieve fiscal year-end breakeven, the balance may be allowed to be carried forward into the next year's budget and rates. RAPC notifies the Government of such exceptions to policy, the reasons why they occurred, and what corrective actions were taken.
Most academic service centers do business mainly with Instruction and Departmental Research users and Organized Research users. Charges to sponsored PTAs should be completed in the soft close however if adjustments still need to be made, centers will also have hard close to post final entries. The academic service center PTAs balances will be rolled into their award/fund with a default project and org code.
Departmental stores service centers (calendar year-end centers) must combine parts of two fiscal years, January through August 31 and September through December, to form their calendar year-end operation and breakeven positions. These service center managers and RAPC review their operations and calendar year-end position prior to December, similar to the above, fiscal year timing schedule.
E. Annual Reporting to the Government
After the close of each fiscal year, RAPC submits to the Government a summary status report for each service center. The summary schedule lists the income, expense, and breakeven position for each center. Also documented are the reasons for any center not meeting the +/- 5% or +/- 15% breakeven requirement and the action taken to resolve the problem.