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Section 6: Accounting for Grants and Contracts

Establishment and Financial Management of Recharge Centers and Specialized Service Facilities

Effective Date:

02/01/08

Approved By:

Kerry Kennedy, Vice President for Business Affairs

Lenora Chapman, Associate Vice President, Financial Affairs

 

Last Revised On:

05/01/14

For Assistance Contact:

Grants and Contracts Financial Services

Assistant Vice President, Financial Affairs and Controller

 

PURPOSE/SCOPE

This guideline provides a framework for the fiscal operations of the University of Texas at San Antonio (UTSA) recharge centers and specialized service facilities to ensure compliance with federal cost principles and consistency in accounting and costing practices.  All recharge centers and specialized service facilities must maintain common accounting and administrative practices despite variations in volume and complexity of goods and services rendered.

AUTHORITY

As a recipient of federal funds, UTSA must comply with OMB Circular A-21, Cost Principles for Educational Institutions, as published by the U.S. Office of Management and Budget (OMB).


UNIVERSITY GUIDELINES

Table of Contents

A. Overview

In this guideline recharge centers and specialized service facilities are referred to collectively as “service centers.”  Service centers are UTSA units that provide goods and/or services to users, primarily within UTSA, and charge users for the goods and services. 

There are three major types of service centers at UTSA: 

1.     Research recharge centers provide services and access to equipment and tools for research activities for a fee.  The Kleberg Advanced Microscopy Center is an example of a research recharge center.

2.     Institutional recharge centers reallocate costs from a central Cost Center to users throughout UTSA.  The rates charged represent a redistribution of expenses and not a fee for goods provided or services rendered.  Examples include Facilities Services and Facilities Coordinated Projects.

3.     Specialized service facilities offer highly complex or specialized services that are not readily available from outside sources  An example is the Laboratory Animal Resource Center.

Because service centers may directly or indirectly charge federal grants and contracts, UTSA must comply with the cost principles and accounting standards required by OMB Circular A-21, Cost Principles for Educational Institutions..”

B. Establishment of Service Centers

The request to establish a new service center must be submitted to the Director, Grants and Contracts Financial Services (GCFS) for initial review using the UTSA Service Center Information Sheet. This information sheet is also used when a service center intends to expand its customer base to include external customers, to add additional services or to update billing rates.

The approval of the Director of the unit involved and/or Dean and the appropriate Vice President is required. Specialized service facilities also require the approval of the Vice President for Research (VPR) or designee.  GCFS or designated costing personnel will review the request with the initiator. Final budget and billing rates will be presented to the Associate Vice President for Financials Affairs or the Assistant Vice President for Financial Affairs for approval.

C. Contractual Requirements for External Customers

An external customer is a customer that does not pay using a UTSA Cost Center/Project ID, such as a faculty member or student acting in an individual capacity.  A unilateral agreement signed by the customer is required for all external customers (see Appendix A). The agreement may not be revised or edited in any way. The billing schedule may be appended to the document along with a full description of the services to be provided. The agreement should be reviewed by the official to whom the service center reports to determine the appropriateness of the proposed work. These agreements must be kept on file by the service center.

External customers who identify themselves as federally funded must provide appropriate documentation (e.g., a copy of the federal award that is paying for the services).  Contact GCFS for assistance in such cases.

  • Revenues from external customers must be tracked separately.

If services are charged to external customers, UTSA may have a liability for unrelated business income tax (UBIT) which is paid by the service center.  For information on UBIT, contact the Office of Financial Services and University Bursar.

D. Billing Rates

1. Internal Customers
  • Internal billing rates should be designed to recover the direct costs of the goods or services provided. Indirect costs of operating the service center that are paid by UTSA and not charged to the recharge center Cost Center (operating account) cannot be included in the calculation of billing rates.
  • All UTSA internal customers must be charged the same rate for the same level of service under the same circumstances.
  • Federal grants and contracts administered by UTSA are internal customers.
  • Federal grants and contracts must be charged a rate equal to or lower than the rate charged to any other customer.
  • Federal grants and contracts cannot be charged for services rendered free of charge to other customers.
  • To determine the billing rate, the total annual costs to provide the goods or services plus or minus any surplus/deficit from the prior year is divided by total annual usage:
    EXAMPLE: Billing Rate = Budgeted operating costs ± prior year adjustment/expected units of activity (customer base)
  • All costs must be reasonable, allowable, allocable and consistently treated. Unallowable costs cannot be budgeted or expensed on service center Cost Centers. See See OMB Circular A-21, Section J  for guidance on allowable and unallowable costs.
  • Allowable costs include but are not limited to:
    • Salaries, wages, fringe benefits
    • Materials and supplies
    • Equipment lease or rental
    • Equipment maintenance contracts/repairs
    • Postage and telephone
    • Non-capitalized equipment (unit cost less than $5,000)
    • Travel expenses related to center business
  • Unallowable costs cannot be included in the internal billing rate calculations. Typical unallowable costs include but are not limited to:
    • Advertising and public relations costs
    • Alcoholic beverages
    • Bad debts or uncollected billings
    • Contingency provisions
    • Cost of equipment $5,000 or greater per item
    • Entertainment costs
    • Fines and penalties
    • Goods and services for personal use
    • Insurance and indemnification
    • Memberships, subscriptions and professional activity costs of a social or individual nature
    • Selling and marketing costs
  • The cost of capital equipment purchases may not be charged to the service center Cost Center (operating account), but the cost of capital equipment purchased with non-federal funds may be recovered by including a depreciation component in the billing rate (straight-line depreciation over the useful life of the equipment). The depreciation portion of annual revenue is transferred to the recharge center equipment reserve, which will be used to purchase replacement equipment.
  • User rates must be supported by cost calculations based on historical costs and service levels. Estimated rates may only be used in the first year of service.
  • A service center may have different measurable units for different types and classes of goods and services offered. User rates consisting of flat fees that charge per range of actual use (e.g. light, medium or heavy) are not in compliance with cost accounting standards. Centers providing multiple services may not subsidize the cost of certain services by charging excessive rates for other services.
2. External customers
  • Separate billing rates should be developed for external customers. These rates should recover all costs, both direct and the appropriate indirect costs. Rates charged to external, non-federal customers should include a surcharge at least equivalent to the current approved Facilities and Administrative (F&A) rate. For more information on Facilities and Administrative costs see Financial Management Operational Guideline (FMOG) - Grants and Contracts Accounting Practices.
  • External rates should not be so low as to constitute unfair competition with private enterprise for similar services available in the area.
  • At no time should an external customer be charged less than internal customers or the federal government for the same service.

NOTE:  Service centers are required to review and update billing rates annually.

E. Billing Procedures

  1. All customers must be billed consistently, timely (no less than quarterly) and accurately for services received. User bills must have sufficient detail to identify the services provided. Billings must be based upon measured and documented use. Billings to internal customers are charged through Interdepartmental Transfers of expense (IDTs). Sufficient detail must be included to identify the services provided, billing rates and usage. A copy of the required project agreement (Appendix C) must be attached as authorization to charge the Cost Center/Project ID.
  2. Service centers must comply with university cash handling and billing procedures. Some external users may be subject to sales tax, which is collected by the service center. For more information see FMOGs Cash Handling and Management and Processing Cash Payments.
  3. All invoices to external customers must be on UTSA letterhead.  Service centers may customize invoices, but all invoices must include the elements shown in Appendix B.   
  4. Advance billings are not allowed. “Pre-billing” customers at year-end for services to be delivered in the next fiscal year is prohibited.
  5. Payments must be deposited to the associated service center Cost Center.
  6. Accounts receivable will be recorded on the same schedule as customer billing.  Fund receipts will be applied to accounts receivable.

F. Accounting Guidelines

1. Accounts

Service centers may have multiple Cost Centers in which to record revenue and expenditures depending upon the customer base.

  • A single Service Center Fund Cost Center will be used to record all income and expenditures derived from internal customers.
  • A separate Designated Fund Cost Center will be established for external customers.
    • A single Designated Fund Cost Center will be used for multiple external agreements that are less than $5,000 per agreement.
    • Individual Designated Fund Cost Centers must be established for each external agreement totaling $5,000 or more.
  • A separate Equipment Reserve Cost Center may be established in the Designated Fund for recovery of depreciation on equipment purchased with non-federal funds.

For more information on Service Center and Designated Funds see FMOG - Chart of Accounts.

2. Expenditures

All costs related to the operation of service centers must be recorded in specified Cost Centers within the Service Center or Designated Funds. This includes salaries, fringe benefits, supplies and related travel costs. Shared expenses must be allocated on an equitable basis to all user Cost Centers/Project IDs.

See “Billing Rates” for a listing of allowable and unallowable costs. 

3. Fiscal review

Service centers should target break-even goals through proper budgeting, rate setting and billing practices. Service centers are responsible for comparing actual costs and revenues at the end of each fiscal year and taking appropriate action.

  • Deficit Balances: Service centers may not operate for more than one complete fiscal year with a deficit balance unless approved by the Associate Vice President for Financial Affairs. Any center with a deficit of more than 10% of operating costs must provide GCFS with a written plan to eliminate the deficit. This plan may include one or a combination of the following:
    • Rate increases sufficient to liquidate the deficit
    • A transfer of funds from another UTSA department

  • Surplus Balances: Surplus balances will be reduced by rate reductions. Surplus amounts will not be transferred from service center Cost Centers to subsidize other university operations or to purchase goods/services for operations unrelated to the service center unless the transfer is to a Cost Center which previously provided a subsidy to cover an operating deficit or provided start-up funds.

GCFS conducts periodic reviews of institutional rechargecenters, and the Office of the VPR conducts reviews of research recharge centers and specialized service facilities for compliance with this guideline.   GCFS may also review break-even and other financial information of research recharge centers and specialized service facilities, but the Office of the VPR has the primary responsibility for review of research recharge centers and specialized service facilities.

Annual reviews include, but are not limited to:

  • consistent, accurate and timely billing of customers
  • appropriate accounting for allowable and unallowable costs and subsidies
  • attainment of break-even goals and the treatment of any surpluses or deficits

Biennial reviews (per OMB Circular A-21) include, but are not limited to:

  • billing rates and practices, including annual update of rates and methodology for calculating rates
  • adequacy of record keeping procedures

Service centers must maintain a schedule of current billing rates to be made available upon request. 

4. Subsidies
  • If fees cannot be set at a rate sufficient to recover operating costs, another department may not directly pay the operating costs of a service center. The subsidy must be accomplished as a transfer of funds to the service center Cost Center . The transfer is not accounted for as revenue or negative expense.
  • Any partial subsidy of a service center either included as part of the budget or absorbed as a deficit at the end of the fiscal year must be identified as an unallowable cost for F&A rate calculation purposes.
  • A class of users (e.g. students) may receive service at a reduced fee if the discount is subsidized from another source, but not through a reduction or elimination of the billing. The discount subsidy must be deposited in the Cost Center as income to avoid misstating either usage or revenue.

     

G. Records Retention

Documents and other records that must be retained by service centers include but are not limited to:

  • Work papers showing how billing rates were calculated
  • Approval of rates
  • Records supporting the level of activity and units of goods/service provided including an Annual Usage Schedule for each billing rate.  All usage of billable equipment must be tracked.  For example, if the rate is census based, a cumulative census by species/lab must be tracked. If the rate is hourly based, total hours must tracked.
  • External and internal customer agreements
Other records as necessary to document:
  • actual direct operating costs of providing the goods/services
  • revenues, billings and collections
  • annual surplus or deficit
  • customer charges, including invoices and other records that identify the service provided to each customer.

Records must be maintained for a minimum of five years, or in the case of grant or contract customers, as long as the grant or contract is subject to audit, whichever is longer.  In no case may the retention period be shorter than the period required by the UTSA Records Retention Schedule.


DEFINITIONS

Term Definition

External Customers

Use of UTSA resources for providing services to external customers: students, individuals or organizations outside of UTSA must be consistent with the primary missions of instruction, research, and public service. See Section  C(2) “External Customers” for additional requirements prior to providing services to external customers.

Internal Customers

Internal customers are defined as those paying for goods and services through interdepartmental transfers (IDTs) against funds held in a UTSA account. Services provided to internal customers require a unilateral agreement (format at Appendix C) signed by the requesting party. This agreement will serve as supporting documentation to be kept on file by the service center. A copy of the agreement should be attached to the IDT as authorization to charge the account.

Service Center

An activity that performs specific technical or administrative services, primarily for the internal operations of UTSA and is authorized to charge users for its services. An authorized service center can provide services to external customers. A separate account is established and monitored to record all costs and revenues.

Specialized Service Facility

A service center that offers highly complex or specialized services that are not readily available from outside sources - for example, animal care facilities. A separate account must be established to record all costs and revenues associated with a Specialized Service Facility.

REFERENCES/LINKS

RELATED FORMS/WORKSHEETS

  1. Service Center and Specialized Service Facilities Information Sheet


REVISION HISTORY

Date
Description
05/01/14
Updated DEFINE information for transition to PeopleSoft.
08/27/09
 Changed guideline section number from 2.5.2. Converted format from PDF to HTML. No  changes to content.
02/27/09
 Published guideline.

 


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