Recharge Center Policy and
Procedure Training
By
Managerial Accounting Services
Patty Whaley – Cost Accounting Mgr.
Jamaal L. Smith – Cost & Rate Accountant
Andrew McManus – Cost & Rate Accountant
1
Target Audience
The target audience for this training:
Recharge Center training is recommended for all business
managers and support staff who have recharge responsibilities
such as setting rates, preparation of rate requests and monitoring
whether fund balances are within tolerance.
2
Course Outline
• Introduction
• General Information
• Types of Recharge Centers
• Internal Vs. External Customers
• Fund Balance
• Rate Setting Cycle
• Preparation of the Rate Request
• Special Rate Setting Considerations
• Subsidies
• Capital Equipment and Depreciation
• Submission Requirements & Routing
• Unique Situations
• Closing Comments
3
Training Objective
The Recharge Center policy will be defined as well as underlying
concepts, processes and documentation necessary for the
successful management of Recharge Center Operations.
4
Introduction
• What is a recharge center or service center?
• Why do we need a recharge policy and procedure manual?
• Where do I find a copy of the recharge policy and procedure
manual?
http://www.purdue.edu/business/mas/BPM/Recharge_Center/
5
Introduction
ALL SALES OF GOODS OR SERVICES MUST HAVE:
• Approval to engage in the activity
• Approval of the rates to be charged to users
6
Introduction: Key Concepts
• Fully costed rate
• External customers should be charged the fully costed rate.
• Facilities and administrative costs must be included for
external customers.
• Rates should not discriminate between federal and non federal
customers.
7
Introduction: Activities Not Covered
• Housing and Food Service
• Vice President for Student Services Auxiliaries
– Student Health Center
– Recreational Sports
– Convocations
• Intercollegiate Athletics
• Credit Courses with Special Fees; Short Courses
• Conferences
8
General Recharge Information
• Types of Recharge Centers
• Internal vs. External Customers
• Fund Balance
9
General Recharge Information
Types of Recharge Centers
• Departmental Recharge
• General Service Center
• Specialized Service Facilities
10
Types of Recharge Centers
Departmental Recharge
• Instruction or departmental function
• Organized activity
• Public service
11
Types of Recharge Centers
Instruction or Departmental Function
• Support instruction, research, or specific departmental function
• Distribute charges primarily within the University
• Achieve break-even over time
– Revenue should (approximately) equal expenses
Examples: Specialized scientific testing and services,
departmental shops and storerooms, and unique
departmental activities
12
Types of Recharge Centers
Organized Activities
• Established to provide training and/or lab experience to
students as part of their educational requirements
AND
• Have high dollar volume activity
Examples: Vet Teaching Hospital, the Pharmacy and
University Theatre
13
Types of Recharge Centers
Public Service
• Provide goods and services primarily to the public
Examples: Agriculture Extension, community outreach programs
14
Types of Recharge Centers
General Service Center
• Established centrally to provide cost-effective services to
University departments
• Recover the costs of goods and services provided
Examples: Transportation, University Stores, Telephone
Operations
15
General Recharge Information
Specialized Service Facilities (SSF)
• Highly complex or specialized facilities
• Must have revenues of at least $1 million per year
• Costs include facilities and administrative costs
Examples: Computing centers, nuclear reactors, etc. As of
May 2013, there are no Specialized Service
Facilities at Purdue University.
16
Determining Type of Recharge Center
Please reference the handout in your packet titled ‘Identification of
Recharge Center Type’.
17
Internal vs. External Customers
Internal Customers:
• Person or organization with a direct relationship to the
University
– Purdue departments, including regional campuses
– Student organizations approved by the dean of students
– Professional organizations for students and staff
– Professional associations in which staff serve as officers
18
Internal vs. External Customers
External Customers:
• Person or organization with no direct relationship to the
University
– PU alumni and former students
– Colleges, universities, school corporations
– Municipal and state supported institutions
19
Fund Balance
• Represents the operating position of the recharge center
based on the balance of working capital within the recharge
20
Fund Balance
• Working Capital = Current Assets – Current Liabilities
• Current Assets – assets that are reasonably expected to be
realized in cash during the normal operating cycle of the
recharge
– Examples: Cash, Accounts Receivable, Inventory, etc
• Current Liabilities – obligations that are reasonably expected
to liquidate with the use of current assets during the normal
operating cycle of the recharge
– Examples: Accounts Payable, Payroll Liabilities, etc.
21
Fund Balance
• To calculate the working capital fund balance:
– Start with cash
– Add other current assets
– Subtract liabilities owed
• Please note: Equipment and Accumulated Depreciation are
NOT current assets. These amounts should be left out of fund
balance calculation.
– Equipment will be found on the 155xxx type G/Ls.
– Accumulated Depreciation will be found on the 156xxx type
G/Ls.
22
Assessing Current Fund Balance
• A departmental recharge
center fund balance
should:
– Remain above -$5,000
– Not exceed +$5,000 or
10 percent of revenue
or two months of cash
expenses, whichever
amount is larger
• The procedure manual
refers to these parameters
as “The Tolerance Zone.”
The Tolerance Zone
-$5,000
+$5,000 or
10% of
revenue or two
months of cash
expenses
23
Assessing Current Fund Balance - Tools
• Demo: Use GR55-Report Group
ZRCH.
• Important Tips:
– Run the report From Period 0!!
– Run the report for your
operating funds only.
24
Assessing Current Fund Balance
• A general service center
fund balance should:
– Have a Target Fund Balance
of two months of cash
expenses
– Lower limit of fund balance
tolerance zone = 90% of
Target Fund Balance
– Upper limit of fund balance
tolerance zone = 110% of
Target Fund Balance
The Tolerance Zone
90% of
Target
Fund
Balance
110% of
Target
Fund
Balance
• The procedure manual
refers to these parameters
as “The Tolerance Zone”
25
Assessing Current Fund Balance - Tools
• Demo: Use GR55-Report Group
ZRSC.
• Important Tips:
– Run the report From Period 0!!
– Run the report for your
operating funds only.
26
Fund Balance – Management Action
• If the current month fund balance is not within the tolerance
zone, we need to ask:
– Does our financial position fit the pattern of prior years at
this same time?
– Is our financial position approximately what was projected
at this time?
– Are there unusual income or expense items this period?
– Where will we be at year end?
27
Fund Balance – Management Action
• At year end, fund balance must be within the tolerance zone.
• Carry forward of out of tolerance balances requires approval
from the Comptroller or her designee.
• Memo should indicate:
– Circumstances behind the out of tolerance position
– Management plans to address the situation
28
Fund Balance – Management Action
• 2013 Annual Fund Balance Review:
– Conducted at year-end
– Based on June 30th fund balances
– Covers funds that have been identified as recharges
• Formal request will be sent to DFAs on Aug. 1st.
• Follow-up to the Annual Fund Balance Review will be
conducted in October to ensure that recharges are taking the
actions outlined in the memos returned to the Costing Office.
29
Review
• Name the three types of recharge centers covered by the
recharge policy
– Departmental
– General Service Center
– Specialized Service Facilities
• Purdue Alumni and former students are considered what type
of customer?
– External
• What is the allowable fund balance range for Recharge
Centers?
– From negative $5,000 up to positive $5,000 or 10% of
income or two months of cash expenses, whichever is
greater
30
Rate Setting Cycle
• Ongoing cycle of monitoring fund balance and adjusting rates.
• Rate year is twelve months in length and begins the first of any
month.
• A new rate year can begin before the end of the twelve month
cycle.
• Fund balance should be monitored monthly.
• New rates should be submitted when the fund balance will be
out of tolerance at the close of a rate year.
31
Rate Setting Cycle
Annual Rate Review
• Even if fund balance remains within tolerance, a rate analysis.
should be conducted at least once a year.
• It is important to periodically validate the cost assumptions.
used in developing each rate.
32
Rate Setting Cycle
33
Preparation of the Rate Request
New Activity
Things to consider:
– Do I need a rate?
– Is the activity appropriate for the mission
of the University?
– Is the amount of the activity material?
• Should it be absorbed on department
funds?
– Who are my customers?
34
Preparation of the Rate Request
Existing Activity with Rate
Things to consider:
– Is the activity still appropriate?
– Is the fund balance within tolerance?
– Are your customers still the same?
• Has there been a change in customer
base that would impact your rate or
one main customer adversely?
– Are there any changes that you can
anticipate that would impact your rate?
35
Preparation of the Rate Request
Preparation of the Rate
• Project rate year expenditures
• Project fund balance
• Calculate the rate
• Calculate external rates
• Prepare the Rate Approval Memorandum
36
Preparation of the Rate Request
Preparation of the Rate
• Example Rate Calculation
– Statement of Income and Expense
– Salary and Wage Schedule
• Example 1 – One composite rate per hour
• Example 2 – Separate rate per staff member
– Supplies & Expense Schedule (optional)
– Break-even Rate Per Unit
37
Preparation of the Rate Request
Statement of Income & Expense
• New Rate
– Meet with individuals involved in the operation.
– Ask questions to obtain information about the operation.
– Develop best estimates for use in rate development.
– Once approved, review fund balance monthly.
• Ensure estimates are relatively accurate
• Avoid extreme over or under recovery of costs from
users
• Adjust rates if necessary
38
Preparation of the Rate Request
Statement of Income & Expense
• Existing Rate
– Run GR55 (Report Group Z100) for the operating fund(s).
• Obtain historical data needed for the Statement of
Income and Expense Worksheet.
– Review for operational changes that may impact the
current or future rate period.
39
Preparation of the Rate
• Example Rate Calculation
– Statement of Income and Expense Worksheet
A template of the Statement of Income and Expense Worksheet
can be found on the Costing website at the following address:
https://www.purdue.edu/costing/BPM/Recharge_Center/recharge.
html
Recharge Forms, Transaction Codes and Tools/References Link
40
Preparation of the Rate
• Example Rate Calculation
– Salary and Wage Schedule
• Example 1 – One composite rate per hour
• Example 2 – Separate rate per staff member
41
Preparation of the Rate
• Example Rate Calculation
– Supplies & Expense Schedule
42
Preparation of the Rate
•
Example Rate Calculation
– Break-even Rate Per Unit
• Example (Polyclonal Antibody—Rabbits from handout)
Total S&W/Fringes:
Total S&E:
$10,220
3,416
Total Depreciation:
Total Annual Cost:
633
$14,269
Less Over Recovery:
(or Plus Under Recovery):
(2,453)
0
Total Cost to be recovered:
Divide by # Services/yr
$11,815
/ 28
= Rate per Unit (Break-even)
$
422 per service
43
Review
• How often should the fund balance be monitored and when
should a new rate be submitted?
– Monitored monthly
– New rate submitted as soon as it becomes clear that the
fund balance will be out of tolerance at the end of the rate
year
• How do you determine the Break-Even Cost per Unit?
– Total Cost to be recovered by the Recharge Center/
Quantity of Units for Rate Year
44
Review
• How are external rates calculated?
– Break-Even cost per unit X Current University F&A Rate =
F&A Cost Recovery
– Break-Even cost per unit + F&A Cost Recovery per Unit =
External Customer Rate
• Determine external rate for Polyclonal Antibody—Rabbits:
Break-even rate * F&A Cost Recovery Rate (54%) = F&A Cost Recovery
$422
*
54%
=
$228
Break-even rate +
F&A Cost Recovery
= External Customer Rate
$422
+
$228
=
$650
45
Break
46
Special Rate Setting Considerations
• Subsidies
• Purchase & Depreciation of Capital Equipment
47
Special Rate Setting Considerations
Rate Subsidies
• A subsidized rate may be offered to internal users.
– Rates charged to other users may not be inflated to recover
the subsidized costs to internal users.
• The break-even rate must be charged to external users.
48
Special Rate Setting Considerations
Recording a Subsidy
• An intramural invoice voucher should be used to process a
subsidy.
– Intramural invoice vouchers are document types JN.
– Debit subsidy account, G/L account 523110 (Recharge
Subsidy).
– Credit recharge account, G/L account 433080 (Recharge
Subsidy Income).
49
Special Rate Setting Considerations
Three Ways to Subsidize
• 1 – Per Unit Subsidy
• 2 – Lump Sum Subsidy
• 3 – Salary and Wage Subsidy (very rarely approved)
50
Special Rate Setting Considerations
1. Set Subsidy per Unit
– Customer’s account is billed for a portion of the unit
cost
– Subsidizing account is billed for the subsidy portion of
the unit cost
51
Example
SUBSIDY PER UNIT
1. Total Costs (TC)
$ 120,000
Units
1,000
Subsidy per unit
$
10
Fully Costed Internal Rate
$
120
Internal Rate
$110/unit billed to customer's account
$10/unit billed to subsidizing account
External Rate
Internal rate $120/unit recharge center income
F&A (54%) $64.80/unit $120 x 54% - deposit to 21010000 4099008000 (G/L 445010)
External Rate $184.80/unit billed to customer's account
If 650 units are for internal customers receiving the subsidy
650 units
x $
10 subsidy per unit
Total subsidy =
$ 6,500
LUMP SUM SUBSIDY
52
Example Continued
• Internal Customer – Intramural Voucher:
• DR 5xxxxx Recharge Expense (customer account fund) $110
• DR 523110 Rchg Subsidy (unrestricted funding source) $10
• CR 4xxxxx Recharge Income (recharge center fund)
• CR 433080 Rech Sub Inc (recharge center fund)
$110
$10
53
Special Rate Setting Considerations
2.
Lump Sum Subsidy
– Subsidy account is billed on a periodic basis, not on a per
unit basis.
– Requires assessment of whom should receive the
subsidy and the corresponding rate to be charged.
54
Example
Units
Subsidy
1,000
$
10,000
Must make some assessment of your customer base and
which ones you might want/need to offer a subsidy
If all of your customers should be subsidized, the calculated
rate could be based on total costs less the subsidy
($110,000).
However, remember you should not
subsidize external customers
Breakdown of units
350
650
Subsidy per unit
$
15.38
Subsidized Internal Rate
$
104.62
External Rate
units to external customers
units to subsidized internal customers
$10,000/650 units
$120 - $15.38
$184.80
$120 x 1.54
68,003
9,997
42,000
120,000
$104.62 * 650
$15.38 * 650
$120 * 350
Total Income to recharge center
$
$
$
$
F&A deposit to 21010000 4099008000
$
22,680
Verification that rates are set correctly:
Internal income to recharge center
Subsidy to recharge center
External income to recharge center
$64.80 * 350 (use GL account 445010)
55
Special Rate Setting Considerations
3 Salary and Wage Subsidy (very rarely approved)
– Salary and wages relating to the recharge center may be
charged to another account.
Two categories:
1. Sponsored Program
2. Request to charge individual effort and/or fringes to
unrestricted account.
–
Requires advanced approval from Senior Vice
President for Business Services and Assistant Treasurer
due to central pool subsidy of fringe benefits (limited as of
07/01/2013).
56
Capital Equipment and Depreciation
Depreciation
• The process of allocating to expense the cost of capital
equipment over its useful life.
• Must be a qualifying purchase.
– Cost is greater than or equal to $5,000.
– Purchased after July 1, 1998.
– Fund source is not federal funds.
57
Capital Equipment and Depreciation
Depreciation
• University Depreciation Method
– Straight line
– Full month of depreciation taken in month placed in service
– No depreciation taken in month of disposal
– Must use the same useful life as provided by Property
Accounting
58
Capital Equipment and Depreciation
Depreciation
• Special Notes:
– Repair parts in excess of $5,000 are not considered a
capital purchase and should be completely expensed at the
time of purchase.
– Software in excess of $500,000 (vendor cost) is considered
capital equipment and is subject to depreciation.
– Once the asset’s useful life used by Property Accounting is
over, the recharge center can no longer recover
depreciation through the rate.
59
Capital Equipment and Depreciation
Depreciation
• All capital equipment used by the Recharge Center must be
purchased through the recharge account, and depreciation
must be recovered.
• Depreciation cannot be recovered on equipment
purchased with sponsored program funds.
60
Capital Equipment and Depreciation
Step 1 - Transfer funding for initial purchase of equipment
• The department will provide funding for the initial purchase of
equipment from an unrestricted account other than the recharge
account.
•
•
DR FUND-COST CENTER (OTHER)
CR FUND-COST CENTER (RCHG)
59XXXX
49XXXX
X.XX
X.XX
61
Capital Equipment and Depreciation
Step 2 – Purchase of equipment
• In FI, the equipment purchase will be processed as follows
(entry completed by property accounting):
– DR FUND-COST CENTER (RCHG)
155XXX
X.XX
– CR FUND-COST CENTER (RCHG)
101400
X.XX
• In FM, the equipment purchase will be processed against the
recharge account on a capital equipment expense G/L
Commitment Item:
– DR FUND-COST CENTER (RCHG)
537XXX
X.XX
62
Capital Equipment and Depreciation
Step 3 - Establish depreciation recovery account
• Necessary for all recharge centers that have purchased
equipment, unless purchased on sponsored project funds.
• Equipment must be purchased in the recharge account in
order to recover depreciation expense.
• Title should be: “DeprRec- XXXXXXXX” where “XXXXXXXX”
represents the recharge operating fund that purchased the
equipment.
63
Capital Equipment and Depreciation
Step 4 - Transfer depreciation expense to depreciation
recovery account
• Depreciation expense is recorded in the Recharge Center
Operating Fund, and the amount can be found by running a
GR55 (Report Group ZRCH) for the period of which you are
transferring depreciation expense.
• Department will transfer depreciation expense to Depreciation
Recovery Account by June 30 of each year
• DR FUND-COST CENTER (RCHG)
59XXXX
• CR FUND-COST CENTER (DEPR REC) 49XXXX
X.XX
X.XX
64
Capital Equipment and Depreciation
Step 5 - Use of funds in depreciation recovery account
• The full cost of the asset will have been recovered at the end of
equipment life.
• Useful life used in recharge center should match the Property
Accounting useful life.
• Funds should be used for additional equipment .
• DR FUND-COST CENTER (DEPR REC)
• CR FUND-COST CENTER (RCHG)
59XXXX
49XXXX
X.XX
X.XX
• Funds may also be returned to the department for use at the
discretion of the department head.
65
Capital Equipment and Depreciation
Why do we need depreciation recovery?
• If we do not use a depreciation recovery account, the amount
we’ve recovered for depreciation will overstate our operating
fund balance.
• To know the correct amount of surplus and/or deficit, we need
to separately record our depreciation recovery.
66
Capital Equipment and Depreciation
Depreciation
• Recharge centers are expected to cover any gains or losses
on disposal, loss, or destruction of equipment.
– If this situation arises or for more information on gains and
losses, please contact the Costing Office.
67
Review
• How should subsidy transactions be processed?
– Using and Intramural Invoice Voucher and
designated G/L accounts
• Can external customers be subsidized?
– No
• Why do we depreciate capital equipment?
– Reserve of $ to assist with the purchase of new or
replacement equipment
– Spreads the cost over the expected life of the
equipment
68
Review
• For recharge centers, how is the initial purchase of capital
equipment funded?
– Dollars transferred to the recharge account
– Equipment purchased from the recharge account
• If a piece of equipment currently being depreciated is sold for
less than the book value, who covers the loss?
– Recharge center
69
Submission Requirements and Routing
What Is Required When Submitting a Rate?
• Rate memorandum
• New Fund Request
• Projected income statement
• Salary and wage schedule
• Rate calculation
70
Submission Requirements and Routing
Rate Request Approval Memo
•
Addressed to the Senior Vice
President for Business Services
and Assistant Treasurer or
delegate per Memo A-18
•
From the Business Manager or
Fiscal Director
•
Through the School DFA
Date, recharge name, recharge
type, and department
• Recharge center director &
location
• Previous approval date
• Recharge account
number(s)
• Rate effective date
• Depreciation recovery
account, if depreciating
• Purpose of activity - Why is
the activity needed?
71
Submission Requirements and Routing
•
•
•
Rate Request Approval Memo
Clients or Customers
• Descriptive information
Including external customers
within the body of the
if anticipated
memo, including:
Accounting procedures and
controls in place
If new operation handling
cash, provide a copy of the
cash handling plan
Present and proposed rates
Include external rates, if
applicable

Any assumptions made

Significant changes
from the previous
approval

Any other special
circumstances or
situations
72
Submission Requirements and Routing
Rate Request Approval Memo
•
Approval recommended signature blocks for Dept Head, Dean/
Director and Comptroller/Costing.
•
Approval signature block for the Senior Director of Business
Managers or delegates.
-
•
-
As designated in the routing and Approval Memorandum A18.
Copies
Distributed to all signatories
73
Submission Requirements and Routing
New Fund Request
•
Most new recharge funds should be 2204
- 22 – Income Producing
- 2204 – Organized Activities/Support Inst. & Res.
•
All General Service Centers should be 2406
- 24 – Auxiliary & Service Enterprises
- 2406 – Service & Other Enterprises
74
Submission Requirements and Routing
Supporting Documentation
• Projected Income Statement, which includes a projected fund
balance
• Salary and Wage Schedule
• Rate Calculation
• Other Supporting Documentation
Note: Individuals are encouraged to send drafts through Costing
before securing signatures
75
Submission Requirements and Routing
Routing and Approval
• Recharge Activities
– New and continuing rates involving academic areas,
academic support areas and recharge activities.
• Reviewed by Costing Office/Comptroller and approved
by the Senior Director for Business Managers.
76
Submission Requirements and Routing
Routing and Approval
• General Service Centers and Specialized Service Facilities
(SSF).
– New and continuing rates originating from a General
Service Center or SSF.
• Reviewed by the Costing Office and approved by the
Comptroller.
77
Submission Requirements and Routing
Routing and Approval
• Exceptions
– Any exceptions to policy will require the approval of the
Senior Vice President for Business Services & Assistant
Treasurer.
• May include, but not limited to
– Variances in F&A rate
– Use of University facilities by external users
– Salary and Wage Subsidies
– Fringe Benefit Subsidies
78
Review
• Should a draft of the rate request be sent through to Costing
prior to obtaining signatures?
– New rate – yes
– Existing rate with significant changes – yes
– Existing rate with minimal changes – not necessary
• True or False – A rate containing a general fund subsidy of
salaries and wages fits within the guidelines of the recharge
policy and may be approved by the Senior Director of
Business Managers?
– FALSE – It is an exception to policy and will require
approval of the SVPBS&AT
79
Break
80
Unique Situations
•
•
•
•
•
Addendums
Flow-through activities
One-time activities
Market rates
Use of University Resources for Non-University Business
What are they? What is required to be submitted for approval?
81
Addendums
• What are they?
– Minor rate modifications
• When are they appropriate?
– Only used to make additions to current rates
– Not a substitute for a full rate request
• Submission Requirements?
–
–
–
–
–
Brief description of changes
New calculated rate(s)
Changes to Statement of Income
Follow normal submission approval routes
Clearly state that this request is an Addendum
82
Unique Situations
Flow-through Activities
• The term “flow through costs” describes the transfer of the
actual cost of the goods or services to the user (i.e. copy
services, postage).
• There is no mark up involved to recover any cost other than
the cost of the good or service initially provided.
• No rate calculations are conducted at the operating unit level
to determine the cost of the good or service.
• Costs of these activities will be incurred in the department’s
operating account and recharges treated as reduction of
expense.
83
Unique Situations
Flow-through Activities
•
Expense recovery for flow-through activities:
•
Example: Chemistry purchased $5K worth of chemicals in bulk, but only needs
$2K of the chemicals. They decide to sell the remaining $3K of chemicals to
the Biology department.
– Credit appropriate expense G/L account for selling department
• On a Journal Voucher (doc type SA) or Intramural Invoice Voucher
(doc type JN) when recovering from other university accounts
DR (Biology-purchaser)
523020 $3,000
CR (Chemistry-seller)
523020 $3,000
• On a Cash Receipts Voucher when payment is received by cash or
check
CR (Chemistry-seller)
523020 $3,000
84
Unique Situations
Flow-through Activities
Intramural (JN) or JV (SA)?….that is the question…
• Postage Charges and Copy Charges - Intramural Invoice
Voucher (JN)
• Other examples of Flow Through Activities - Journal Voucher
(SA)
85
Unique Situations
Flow-through Activities
• Rate Approval Memorandum is not required.
• No rate calculation is needed.
86
Unique Situations
One-time Activities
• Activities that are non-recurring or occur on a periodic or
irregular basis.
• Require approval of both the activity and the
corresponding rates .
• Budgeting and accounting requirements will be evaluated
on a case by case basis.
• Very rare
87
Unique Situations
One-time Activities
• Items required for submission
– Rate Approval Memorandum
– Rate calculation
• Depending on the nature of the activity, may also
include:
– Projected income statement
– Salary and wage schedule
– Projected fund balance
88
Unique Situations
Market Rates
• In instances where services are provided on a market price
basis (not a calculated rate basis) the normal market price
may be charged to external customers only
• Include with the request to establish Market Rates:
–
–
Justification of the need to use market prices
Sufficient evidence of market research to validate the
price requested
• The rate charged must cover the full cost of the goods or
services
– Includes F&A costs for external customers
89
Unique Situations
Market Rates
• Items required for submission
– Rate Approval Memorandum
– Salary and Wage schedule
– Projected Income Statement, including the Projected Fund
Balance
– Rate Calculation (to provide documentation of break-even
rate)
– Justification for use of market rate
– Evidence of market research
90
Unique Situations
Use of University Resources for Non-University Business
• Policy set forth in Senior Vice President for Business
Services and Assistant Treasurer Memo No.88
“Special research facilities, services, supplies and equipment
unique to a university and not readily obtainable commercially are
available to outside users for purposes related to research and
development on a priority basis after all needs of the university
are met. Users are, of course, required to pay full cost including
charges to reimburse the University for indirect expenditure, use
of specialized personnel, and other appropriate items.”
One common example: Use of equipment
91
Unique Situations
Use of University Resources for Non-University Business
• Applying Memo No.88 for use of equipment
– Identify the equipment being used.
– Set parameters around the use of the equipment:
• Use of this equipment can occur only after all needs of the
University are met.
• Purpose must be defined, for example:
– Consulting for xyz company
– Use benefiting a faculty member’s start-up company
• Usually requires a contractual agreement.
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Unique Situations
Use of University Resources for Non-University Business
• Calculating Rate for Equipment Use
– Consider the following:
• Original cost of the equipment
• Account of acquisition
• Age of equipment
• Expected useful life
• Type of equipment
• Use requirements
• Length of time equipment will be used
• Recovery of F&A costs
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Unique Situations
Use of University Resources for Non-University Business
• Items required for submission
– Rate Approval Memorandum and justification
• Include specific parameters
– Rate calculation
– Accounting treatment
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Closing Comments
Key Concepts
• All sales of goods and services must have approval to engage in
the activity as well as approval of the rate to be charged.
• Rates should be fully costed.
• External customers should be charged the fully costed rate +
F&A.
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Closing Comments
Key Concepts
• Facilities and administrative costs must be included for
external customers.
• Rates should not discriminate between federal and
non-federal customers.
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Closing Comments
Recharge Center Resources
• Managerial Accounting Services Website – Recharge Center
https://www.purdue.edu/business/costing/BPM/Recharge_Ce
nter/index.html
•
•
•
•
Recharge Center Policy
Recharge Center Procedure Manual
Questions & Answers
Forms, Spreadsheets & Queries
97
Resources- Mangerial Accounting
Services Website
98
Resources – Recharge Center Tab
99
Resources – Forms, Transactions and
Tools
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Closing Comments
Recharge Center Resources
• Rate Request Preparation and Management Questions
Andy McManus
Cost & Rate Accountant - Costing Office
6-6188
amcmanus@purdue.edu
Jamaal L. Smith
Cost & Rate Accountant - Costing Office
4-8053
smith42@purdue.edu
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Closing Comments
Recharge Center Resources
• Depreciation/Equipment Questions
Lisa Geisler
Property Accounting Manager
4-7376
lgeisler@purdue.edu
• Account Set-up Questions
Master Data
cmdt@purdue.edu
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Questions or Comments?
Session evaluations will be e-mailed.
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