Policies

9.32 Recharge Centers

Purpose Statement:

This policy covers the operation and rate setting of Recharge Centers, and provides information and guidance on the allowability of intradepartmental and interdepartmental charging for goods and services.  Regulations issued by the Department of Health and Human Services (DHHS), and the Office of Management and Budget (OMB) Circular A-21 establish cost accounting standards that must be followed for consistency in accounting and costing practices.  As a recipient of federal research funding, UNI is required to follow the cost principles outlined in these regulations.  The University may be audited by the cognizant federal agency for compliance with federal recharge center regulations.  The University also has a fiduciary responsibility to ensure that State appropriated funds are charged at break-even pricing based on allowable costs.

 

Who Should Know This Policy:

Institutional Officials
Directors and Department Heads
Financial Accounting and Reporting Services Personnel
Sponsored Programs Personnel
Budget Administration Personnel
Recharge Center Directors and Fiscal Officers
Principal Investigators and Project Directors

 

Policy Statement:

Key Principles Governing Recharge Centers

Recharge Centers are organizational units or activities established for the purpose of providing goods and services primarily to University users, and secondarily to external users.  Recharge Centers charge the users for these goods and services.  University departments may engage in the direct sale of goods or services only when those goods or services are directly and substantially related to the mission of UNI.  Recharge Centers are used as a means to provide commonly used goods or services that are convenient and sometimes unique. 

University departments intending to establish a Recharge Center must receive the approval of the Office of Financial Accounting and Reporting Services.  User rates charged for goods and services must also be approved and must be based on rate proposals.  User rates must be based at break-even pricing based on allowable costs.  Recharge Center rates may be lower than those commercially available locally due to the University's purchasing power.  These user rates must be charged uniformly to all University customers.

University wide Recharge Centers include, but are not limited to, Physical Plant Labor, Facilities Services Construction Project Supervision and Administration, Telecommunications, Print Services, Campus Fueling Station, Campus Supply, and Vehicle Pool. 

Departmental Recharge Centers normally operate within an academic division or department and provide support to that division or department.  They usually do not have a high dollar volume.  Examples include ITS Production Services, Center for Social and Behavioral Research, photocopy centers, and stores used only by a department or division. 

When charging for goods or services provided to other departments, the rates charged shall be calculated consistently with the costing standards noted in OMB Circular A-21 and as set forth in this policy.  The following is a summary of UNI's key principles governing Recharge Center operations:

  1. A department that plans to establish a Recharge Center must prepare and submit a "Rate Proposal, Questionnaire, and Pro Forma Income Statement."  The proposed user rates must be approved by the Office of Financial Accounting and Reporting Services before the user rates may be implemented.
  2. Recharge Centers are not permitted to charge for goods and services unless their user rates have been approved by the Office of Financial Accounting and Reporting Services.
  3. Recharge Centers must submit a "Rate Proposal, Questionnaire, and Pro Forma Income Statement" on an annual basis to the Office of Financial Accounting and Reporting Services.  A review will be made of large Recharge Centers on an annual basis and small Recharge Centers on a bi-annual basis.
  4. Each Recharge Center will have its own operating account.  If it uses capitalized equipment, it will also have its own depreciation reserve account.  All revenue deposited in Recharge Center accounts is University revenue.  All expenses paid from Recharge Center accounts must be made in accordance with the federal regulations cited in this policy.
  5. User rates must be supported by a well documented rate proposal showing how the rates were calculated.  Rate proposals must contain a schedule of allowable costs and supporting schedules of personnel costs and depreciation costs.  User rates are to be calculated in such a manner to ensure that a proportionate share of allowable costs is allocated to all users, and they are applied consistently.  No cost may be shifted from one user to another.  Separate user rates must be developed for distinctive types of services when the sales volume is significant and the cost of providing the service is substantially different from other services. To the extent practicable, Recharge Centers should advise users of price changes in advance of implementation.
  6. Recharge Centers are normally expected to break-even annually by incorporating surpluses or deficits into the following year's user rates.  The Office of Financial Accounting and Reporting Services may permit Recharge Centers to break-even over a three-year operating cycle based on a written request from the Recharge Center's director or department head.  Recharge Centers may retain on an ongoing basis a positive balance equal to a maximum of 60-days of current expenditures, which equates to 16.67 percent of a year's expenditures.  Recharge Centers with negative cash balances will be reviewed on a periodic basis.  A cash subsidy may be required from the sponsoring department to clear deficits that are not eradicated within a reasonable period of time.  Operating surpluses may not be transferred out of the Recharge Center account to subsidize other activities.
  7. Capitalized equipment with an original cost of $5,000 or more cannot be expensed in the Recharge Center account.  Instead, depreciation expense is included in the rate calculation.  Once a piece of capitalized equipment is fully depreciated, it cannot be included in rate calculations.  The actual depreciation expense used in the University's accounting system must be used in the user rate calculation. Recharge Center fiscal officers should contact the Fixed Asset Accountant in Business Operations for depreciation expense information.  Equipment purchased with Federal funds may be used in the Recharge Center, but it should not be incorporated into the rate calculation. Depreciation reserve accounts may be established to replace equipment. Depreciation will be recorded as an expense in the Recharge Center's operating account and a negative expense in the depreciation reserve account by personnel from the Office of Financial Accounting and Reporting Services.  Personnel from that office will monitor Recharge Centers to verify that capital assets are not being purchased from a Recharge Center's operating fund and they will monitor the Recharge Center's depreciation reserve account to ensure only capital assets are being purchased from the account and fund balances are not negative.
  8. User rates must be based on the direct costs of operating the Recharge Center.  Direct costs include expenses for personnel, supplies and materials, maintenance contracts, other operating expenses, administrative overhead, and depreciation expense.  Unallowable costs such as bad debts, fines, interest expense, contingencies, reserves, and the acquisition cost of capitalized equipment should be excluded from rate proposals. Amounts anticipated for administrative subsidies, if any, should be factored in as a reduction or offset of total expenses before calculating the user rates.
  9. Most Recharge Centers will have direct costs which cannot be reasonably assigned to a specific service or product.  Common costs should be pooled together and allocated to goods or services.
  10. On-campus Recharge Centers may not include the cost of the space that it occupies in its user rates.
  11. Rates charged to internal customers must be based on projected actual costs as modified by surpluses or deficits from the preceding fiscal year, anticipated price changes, and anticipated capitalized equipment purchases.
  12. Recharge Centers may not charge customers on a fixed price basis and they may not charge in advance of rendering goods and services. 
  13. The Office of Financial Accounting and Reporting Services will maintain a list of approved Recharge Center user rates on its web site.  Recharge Centers should provide a link from their web site to the Financial Accounting web site.
  14. Recharge Centers should not provide a significant amount of goods or services to the private sector.  State law, Regents' policy, and University policy restrict competition with the private sector. 
  15. Recharge Center directors and finance personnel should monitor Center activity to ensure compliance with this policy.
  16. This policy does not apply to the following types of accounts:  Sales of Educational Activities (examples:  Price Laboratory School and Speech and Hearing Clinic), Auxiliary Enterprises (examples:  Department of Residence and J.W. Maucker Student Union), and Shared Services accounts (examples:  UNITix and Refuse Services). 
  17. Recharge Centers will not normally be established for activities expected to have less than $10,000 of annual allowable costs.

 

Applicable Federal Regulations

UNI must comply with the OMB Circular A-21, Cost Principles for Educational Institutions and Cost Accounting Standards, as it pertains to recharge centers.  Compliance with A-21 is implicit in this policy. 

According to Section C point 4(a) of Circular A-21, costs must be allocable.

"A cost is allocable to a particular cost objective (i.e., a specific function, project, sponsored agreement, department, or the like) if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or other equitable relationship.  Subject to the foregoing, a cost is allocable to a sponsored agreement if (1) it is incurred solely to advance the work under the sponsored agreement; (2) it benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods; or (3) it is necessary to the overall operation of the institution and, in light of the principles provided in this Circular, is deemed to be assignable in part to sponsored projects.  Where the purchase of equipment or other capital items is specifically  authorized under a sponsored agreement, the amounts thus authorized for such purchases are assignable to the sponsored agreement regardless of the use that may subsequently be made of the equipment or other capital items involved." 

According to Section D point 2 of Circular A-21, recharge centers may charge sponsored agreements as long as their costs are consistently treated as direct costs of the University and are charged using a recognized method of computing actual costs and conform to generally accepted cost accounting practices consistently followed by the university.

"...The cost of materials supplied from stock or services rendered by specialized facilities or other institutional service operations may be included as direct costs of sponsored agreements, provided such items are consistently treated, in like circumstances, by the institution as direct rather than F&A costs, and are charged under a recognized method of computing actual costs, and conform to generally accepted cost accounting practices consistently followed by the institution."

According to Section F point 6(b) of Circular A-21, departmental administration expense must be treated consistently in like circumstances.

"Other administrative and supporting expenses incurred within academic departments are allowable provided they are treated consistently in like circumstances.  This would include expenses such as the salaries of secretarial and clerical staffs, the salaries of administrative officers and assistants, travel, office supplies, stockrooms, and the like."


Procedure:

A department that plans to establish a Recharge Center must prepare and submit a Rate Proposal and Questionnaire, and Pro Forma Income Statement (see http://www.vpaf.uni.edu/fars/policies/recharge_ctr.shtml) to Financial Accounting and Reporting Services. The proposed user rates must be approved by the Office of Financial Accounting and Reporting Services before the user rates may be implemented.

User rates for Recharge Centers should be computed annually using templates provided by Financial Accounting and Reporting Services.  Management of the Recharge Center should calculate the user rate by following a two-step process.  First, develop an annual expense budget which includes salaries, fringe benefits, materials, supplies, depreciation, and any other expense necessary to operate the Center for the following year.  Second, divide the expenses by the units of usage expected for the Center.  Rates for customers must be set so that the revenue does not exceed the cost of providing the goods or services. 

 

Contacts:

Subject Contact Office Phone
Recharge Centers Gary Shontz Financial Accounting 273-3576
Recharge Centers Michele Mullings-Shand Sponsored Programs 273-3217
Principal Investigators Paul Below Sponsored Programs 273-3217
Rate Proposals Tonya Gerbracht Financial Accounting 273-6520

 

Vice President for Administration and Financial Services, approved 6/4/2010
President's Cabinet, approved 7/13/10