I&R Training
Policies, Procedures, &
Proposal Preparation
January, 2012
Agenda
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Income & Recharge Introduction
Functional Responsibilities
Types of Review
Rate Development Steps
Managing a Recharge Center
Proposal Preparation
Questions and Common Issues
References and Contact Information
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Introduction
University departments provide goods and services that
are not “core funded”, and therefore must charge
for those services
Clients may be campus departments, students, faculty,
staff, and/or general community
Charges to campus departments = RECHARGE
Charges to outside groups = INCOME
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Campus Review
Required by Federal and University policies to review
and approve rates charged for goods and services
To insure consistent costing procedures are used
throughout the campus
Insures that departments & control points actually
review their self-supporting activities
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TYPE 1 RECHARGE
1.
The cost charged to one department for specific
goods or services by another department. Includes
auxiliary and services enterprises, academic
department support units, plant services
Most recharges fall into this category
Examples: copy services, use of research equipment,
automobile rentals
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TYPE 2 RECHARGE
• The cost charged to self-supporting activities that are
primarily funded from external income for identifiable
services provided by central campus administrative
offices
• Example: NSFAS, Accounting charging Housing for
payroll services.
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TYPE 3 RECHARGE
The cost charged to a department for special services
by a central campus administrative office, beyond
normal services provided
Example: Human Resources provides a broad range of
services to the campus free of charge, and also
provides training classes for a fee
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DEPARMENTAL ROLES
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Overall operation of the recharge center
Compliance with all University policies and
procedures
Reviews the budget, revenue, expenses,and
services provided on an ongoing basis
Preparation and submittal of annual rate review
package to the control point and Budget Office
in a timely manner
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CONTROL POINT ROLE
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Oversees and assists with the operation of
recharge units
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Reviews and endorses all new rates, rate revisions
and self-certification forms prior to submission to
the Budget Office
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Reviews and concurs with any surplus/deficit
reduction plan
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I&R COMMITTEE ROLE
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Oversees the Income and Recharge process
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Approves the establishment of all new recharge
units
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Approves Rate Revision and On-Cycle reviews
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Reviews and approves all surplus/deficit reduction
plans
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BUDGET OFFICE ROLE
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Provides the Chair to the Income & Recharge
Committee and ongoing staff support to the committee
Acts in an advisory capacity to recharge centers and
departments
Reviews rate proposals (approves Self-Certification
Reviews
Provides training to the campus community
Provides ongoing fiscal review of the University’s
recharge operations
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ACCOUNTING & AUDIT ROLE
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Provides general accounting assistance to
recharge units, including assignment of object
codes, fund set up, accounting for inventory and
depreciation & reserves
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Provides assistance on tax issues such as
Unrelated Business Income Tax and sales tax
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Provides training to the campus community
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REVIEW TYPES
After a new rate for goods or services has been
established, an annual review must be submitted to
the Budget Office through the control point
Self-Certification Review
Rate Revision Review
On-Cycle Review
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SELF-CERTIFICATION REVIEW
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No new goods or services
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No change in costing methodology or business
practices
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No personnel or salary changes beyond those
authorized or anticipated by the University
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Review and approval delegated to the Budget
Office
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RATE REVISION REVIEW
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New rates requested due to changes in costing
methodology, business practices, or personnel are
different from those authorized or anticipated by the
University.
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Review by Income and Recharge Committee
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ON-CYCLE REVIEW
Depends on volume of unit’s recharge activity:
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Income is greater than $200K/year - a complete review
every 3rd year
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Income is between $50K and $200K/year - a complete
review every 5th year
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Income is less than $50K/year - no On-Cycle Review;
the annual Self-Certification Review is sufficient
Reviewed by Income and Recharge Committee
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RULES & CRITERIA
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Funding for the service is not part of the
department permanent budget
A specifically identifiable good or service is
provided
Services are unique or specialized
Services are provided to multiple
departments on a regular, ongoing basis
Separate costs and budgets must be clearly
defined for the activity
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RULES & CRITERIA
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Services provided should not be readily available from outside
sources. If they are, there must be overriding economic or
ethical issues requiring the University to provide these
services.
All campus users are charged the same rate for the same
services provided
Recharge centers must only charge their published, approved
rates
Units should operate on a break-even basis
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RULES & CRITERIA
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Services can be provided to non-campus, nonaffiliated entities only if they are unique and support
the campus’s academic mission. Rates charged to
these entities should be fully costed and include the
campus’s indirect cost surcharge.
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All rates must be reviewed annually. Review may
be in the form of Self-Certification, On-Cycle
Review, or Rate Revision Review
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RATE CRITERIA
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Must cover full cost of the operation. May also
include indirect costs.
Must be reasonable
Should be developed to break even
Must be consistently charged
May be subsidized
“Deterrent Fees” - late fees, rush fees - may be
charged with proper justification
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DIRECT COSTS
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Include all direct costs - all allowable direct costs of
providing the product or service should be included
in the recharge pool
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Costs are identifiable - they can be identified
specifically with a recharge product or service
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Costs need to be reasonable - is the cost generally
recognized as necessary for the operation?
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DIRECT COSTS
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Costs need to be treated consistently
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Costs are reasonably allocable - must be able to
assign a cost, or a group of costs, to the recharge
pool in reasonable and realistic proportion that
reflects the benefit provided
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ALLOWABLE COSTS
Allowable costs include:
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Salaries, wages and fringe benefits
Supplies and services
Maintenance and repair of equipment
Equipment depreciation
Administration costs of the recharge unit
Lease costs of non-University owned space
Prior year operating surplus/deficit that occurred
through the normal course of business
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UNALLOWABLE COSTS
A-21 unallowable costs (e.g., entertainment,
memberships, donations & contributions,
advertising, bank card fees, bad debts, legal fees,
fines & penalties)
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Costs of capitalized improvements
Exceptional charges that did not occur
through the normal course of business (e.g.,
costs related to non-recover of recharge income
due to department not billing recharge customers in
accordance with University billing procedures)
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EQUIPMENT
Inventorial equipment is a stand-alone item with a
useful life greater than one year and a value
greater than $5,000
Federal guidelines do not allow the purchase cost of
equipment to be charged directly to the recharge
activity. Equipment must be funded from some
other source (e.g., equipment reserves, general
funds, gift funds, or other unrestricted fund
sources)
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EQUIPMENT DEPRECIATION
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Equipment should be depreciated on a straight-line
basis
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Useful life tables can be found at:
http://eulid.ucop.edu
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Depreciation must begin in fiscal year that
equipment is purchased
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See Dale O’Donnell in Accounting if equipment will
be depreciated
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EQUIPMENT DEPRECIATION
Depreciation expense is included as a cost in
the rate development except when:
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Equipment is funded by the federal
government
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Equipment is identified as cost sharing to a
federal research project
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RATE SUBSIDIES
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Subsidies fund a portion of the recharge unit’s total
costs, which results in lower rates
Multiple subsidies are allowed
Non-campus users should be charged
unsubsidized rates
Subsidies may be used to:
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Offset expenses of the recharge activity
Pay for specifically identified purchases
Reduce the price for all University users or specific
products or services
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ALLOCATING JOINT COSTS
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Departments that have more than one service unit
may have joint costs that apply to some or all of the
units
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The joint costs should be allocated to the units on a
basis that reflects the benefit to the unit
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Common bases for allocating joint costs:
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FTE
Chargeable labor hours
Hours of machine usage
Assignable square footage
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RESERVES
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Make appointment to see Dale O’Donnell in
Accounting - dale.odonnell@accounting.ucsb.edu
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Rates that include equipment should have a
depreciation reserve
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MANAGING RECHARGE CENTERS
Recharge Center Budgets
Customer Relations and Consultations
Billing
Deficits and Surpluses
Reserves
Equipment Purchases
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RECHARGE CENTER BUDGETS
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All recharge departments must have a permanent
budget that reflects projected revenue and expense
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Permanent budgets must be revised at the end of
the fiscal year to account for the anticipated
changes and be reflected in the July 1 Adjusted
Budget
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Work with Arliene Shelor in the Budget Office to
establish or update the permanent budget
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CONSULTATION WITH USERS
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Recharge providers must notify customers as early as
possible of proposed rate changes
(This should happen when the Rate Revision Review is
submitted)
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Departments should have in place a process to
determine customer satisfaction, which should be
documented in the rate proposal package
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Approved rates for goods and services should be
posted and readily available to potential and current
users (e.g., on a web site, in the department office)
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BILLING
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Recharge unit may not bill in advance of providing
goods or services
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Departments need to bill their customers in a timely
manner:
• No longer than 45 days after goods or services
have been delivered, or
• No longer than 45 days after recharge center
has been billed by third party providing goods or
services
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BILLING
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Recharge unit must use correct account/fund/sub
as provided by customer
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External users must be billed through BARC
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May only bill customers using approved rates
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DEFICITS & SURPLUSES
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Recharge center should operate on a break-even basis
Surplus: general fund balance greater than 30 days
operating expense
Deficit: general fund balance deficient by greater than 30
days operating expense
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A unit that is out of tolerance must develop a “recovery
plan” to bring it back into range within 3 months of being
notified by Accounting Office or Budget Office
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DEFICITS & SURPLUSES
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Recovery plan must be put in place to eliminate
surplus or deficit within three years
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Plan needs to be reviewed and endorsed by
Control Point before it is forwarded to Budget Office
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If plan requires a rate change, a Rate Revision
Review must be completed
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PROPOSAL PREPARATION
1.
Identify lines of business
2.
Pool costs along lines of business
3.
Identify means of distributing costs
4.
Estimate usage
5.
Develop rates
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GENERAL RATE CALCULATION
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In its most simple form, a recharge rate is
calculated by dividing the total cost of providing the
goods or services by the total projected activity
Total Budgeted Expense
Rate =
(Plus Prior Year Deficit, or Minus Prior Year Surplus)
Total Projected Level of Activity for the Budget
Period
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RATE CALCULATIONS
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Productive Time Calculation
Recharge Personnel Hourly Rate Calculations
Sample Rate Calculation - Labor
Sample Rate Calculation - Mark-Up
Sample Rate Calculation - Production
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Calculation and Revenue & Expenses Summary
Sample Rate Calculation - Rental
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Calculation and Revenue & Expenses Summary
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THE RATE PACKAGE
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Transmittal Memo
Rate Proposal Cover Sheet
A - Description of Goods and Services
B - Customer Information
C - Summary of Individual Rates
D - Proposed Budget
E - Actual Expense and Revenue Summary
F - Equipment Depreciation
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QUESTIONS
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REFERENCES
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University of California Business and Finance Bulletin A-47,
University Direct Costing Policy
University of California Business and Finance Bulletin A-56,
Academic Support Unit Costing and Billing Guidelines
University of California Business and Finance Bulletin A-59,
Costing and Working Capital for Auxiliary and Service
Enterprises
OMB Circular A-21, Cost Principles of Educational Institutions
July 14, 1993 letter from University Controller Joseph A.
Pastrone to Administrative Vice Chancellors regarding “New
Recharges to Federal Grants and Contracts”
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CAMPUS CONTACTS
BUDGET OFFICE
Todd Lee
X2169
todd.lee@bap.ucsb.edu
Arliene Shelor
X4052
arliene.shelor@bap.ucsb.edu
Jim Corkill
X5882
jim.corkill@accounting.ucsb.edu
Dale O’Donnell
X2998
dale.odonnell@accounting.ucsb.edu
X2829
wandalynn.riley@audit.ucsb.edu
ACCOUNTING OFFICE
AUDIT SERVICES
Wanda Lynn Riley
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