Finance 701: Service/Recharge Centers

Purpose

To provide the rules for establishing a service

Reference

Board of Regents Policy 05.15.00

Statewide Accounting Manual P-112

OMB Circular A-21, Cost Principles for Educational Institutions

Definitions

Service Center: A university unit or activity whose primary customers are university departments and sales to these departments generates a significant portion of the unit's revenues. Interdepartmental billings are the predominant revenue source for a center. A "recharge" is the assessment, collection, or charge, at approved rates, by one department or unit for goods or service furnished to another department, activity or project. Time & Materials Center: A service center with less than $100,000 per year in gross receipts, sales to external parties of less than 5 percent of gross receipts, inventory of less than $50,000 and a June 30 fiscal year operating cycle. Recharge Center: A service center with (10 more than $100,000 per year in gross receipts, or (2) sales to external parties of more than 5 percent of gross receipts, or (3) an enterprise operating cycle which is other than a June 30 fiscal year, or (4) inventory in excess of $50,000, or (5) permission/directive from the Vice Chancellor for Administration to be classified as a recharge center rather than a T&M Center.

Policy

Eligibility
In conformance with federal regulations, activities that charge other departments for services or products must be established, as a general rule, as either a time and materials center or a recharge center. Once established, these centers must comply with the guidelines of Accounting Manual Procedure P-112 and this policy. Exceptions to this rule include:

Auxiliary services (governed by other pricing regulations) Mailroom (postage is a recharge of carrier rates) Service Center Approval Requirements To establish a new recharge center, an operating plan as described in P-112 must be submitted to the Associate Vice Chancellor for Budget & Finance (AVCBF). If the review by the AVCBF indicates the request conforms to the requirements of P-112, the request will be submitted to the Vice Chancellor for Administrative Services for approval. Upon the approval of the Vice Chancellor, the AVCBF will coordinate with the budget office to establish enterprise fund accounts for the service center.
Before submitting a request to create a new service center, units should thoroughly review the procedures and requirements specified in P-112.
Annual Approval Requirements The rates charged by service centers must be approved each year. In conformance with the guidelines and documentation requirements presented in P-112, a proposal must be submitted to the AVCBF (delegated by the Vice Chancellor for Administrative Services) for approval. The deadline for the submission of the proposal is June 1. If the plan and pricing calculations are in conformance with procedures, the AVCBF will approve the rates for the following fiscal year.
Equipment Depreciation As specified in P-112, equipment purchases or lease purchase payments are not directly recoverable through the recharge rate. However, depreciation is an allowable cost that should be reflected in the recharge rate. Annual depreciation expense must be calculated in conformance with the guidelines contained in P-112. Charge the depreciation on a straight-line basis using the asset lives contained in the following table:

 Exclude items from the depreciation calculation if the age of the items exceeds the life expectancy (i.e., the items have been fully depreciated).
Records Retention Each service center is responsible for the records retention requirements specified in P-112.
Questions Contact the Associate Vice Chancellor for Budget & Finance on questions regarding eligibility and pricing methodology.

Effective: 08/30/2005