GAP 200.300, Service Center Administration

  1. General
  2. Definitions
  3. Objectives
  4. Service Component Rate Development
  5. Shared Resources Rate Development
  6. Approval of Recharge Rates
  7. Application of Approved Recharge Rates
  8. Charges to External Users
  9. Roles and Responsibilities

 


 

I. GENERAL

The purpose of this procedure is to provide consistent operational guidance for Duke University service centers to promote compliance with University policy and government cost principles (2 CFR Part 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance)).

Oversight of Service Centers is the responsibility of the Associate Vice President, Cost & Reimbursement Accounting, the Director, Cost Reimbursement and Analysis and the appropriate Management Centers.

 

II. DEFINITIONS

Service centers are organizational units that provide goods or specific technical or administrative services mainly to Duke University and Health System departments. Services to external users may be provided in accordance with specific guidelines (see Section VIII).

Service centers charge the user directly for these goods/services using rates based on costs incurred. The two types of service centers are:

Service Component

Service components provide complex, specialized services to the University and Health System and generate greater than $1,000,000 of recharge credits per fiscal year. The option of establishing a service component at a recharge credit level below $1,000,000 is at the discretion of the appropriate management center with coordination of Financial Services.

Currently service components are in the 1579xxx cost center series (e.g., Copy Center, Lab Animal Resources).

The expense base can include internal service center support costs (direct expenses), capital equipment depreciation, and space and general administrative costs. The potential customer base for service components includes the entire University and Health System.

 

Shared Resource

Shared resources provide goods and/or services that do not represent the major purpose of the generating department. A shared resource includes a department or cost center that provides goods/services intradepartmentally, that is, to other departments/divisions generally associated with the shared resource. An example of a shared resource would be an electron microscope.

The services are intended as a convenience to faculty, staff, and students. Rates are based on direct costs only and can only include internal cost center support costs. Capital equipment depreciation may also be included with approval from the appropriate management center and the Associate Vice President, Cost & Reimbursement Accounting.

  • Operating units such as Bookstores, Housing, Dining, etc. that provide goods and services to external/individual users on other than an incidental basis are not considered service centers for purposes of this procedure. Most of these types of units are considered "auxiliaries" and have a primary customer base that includes students. It should be noted that any charges made to internal users for goods and services should be documented as reasonable in relation to the costs of providing the goods and services.
  • Department copiers, fax machines, etc. are not considered to be shared resources if the charge is reasonable and is merely to recover the cost of supplies (paper, toner, etc.). It should be noted that any charges made to internal users should be documented as reasonable in relation to the costs of providing the goods and services.

 

III. OBJECTIVES

The objectives of a service center include the following:

  • To provide services or goods to University or Health System units in a more convenient manner than is available from outside vendors.
  • To provide services or goods at a total cost to the University or Health System that is less than that of outside vendors.
  • To provide services or goods required within the University or Health System that is not readily available from outside vendors and/or facilities.
  • To provide a mechanism for capturing the cost of providing services or goods and to distribute that cost to University or Health System users.

 

IV. SERVICE COMPONENT RATE DEVELOPMENT

Account Code Structure

Service components are assigned a unique cost center in the 1579xxx series to accumulate the costs of providing their services or goods. All costs directly and indirectly associated with providing their services or goods should be recorded in this cost center and referred to as the "operating fund."

Service components are assigned a unique G/L account in the 7xxxxx series to monitor the recharge of internally rendered services (refer to G/L Account Definitions, 7xxxxx: Recharges.) This G/L account is used to record both the charges to the university unit receiving the service and the offsetting credit in the operating cost center of the service component. For the Health System, the G/L account is used only to record the offsetting credit in the operating cost center of the service component. The Health System unit receiving the service will record the costs under the natural G/L account cost classification.

Establishing New Service Component Cost Center

  • Complete the Cost Object Request Form
  • Submit the Cost Object Request Form to the appropriate Management Center
  • Once approved, the Cost Object Request Form will be forwarded to Accounting System Administration; they will notify the Management Center when the cost center has been set up.

Development of Service Component Recharge Rates

Recharge rates established by service components should be based on the actual cost of providing services and not necessarily what independent, for-profit businesses are charging for the same services. In some instances, when approved in advance by the respective Management Center administration, it may be appropriate to establish rates that are designed to recover less than "full cost." For service components which are expected to, recover full cost via the recharge mechanism, rates must be within the competitive pricing ranges established by independent for-profit businesses. Rate structure has obvious implications on how costs must be managed within the service component.

Full cost can include direct costs, depreciation on capital equipment, and space and general and administrative expenses for service components. Certain types of expenses should be excluded from the rate calculations because they are unallowable for federal reimbursement.

Allowable Direct Costs

Salaries, wages, fringe benefits, supplies and materials, subcontracts, and outside services.

Unallowable Direct Costs

The following may not be charged to the operating 1579xxx cost center and must be excluded from billing rates for all service components:

Description G/L Account
Scholarship/Fellowships 63xxxx
Capital Acquisitions 66xxxx
Advertising and Publicity 6902xx
Bad Debts 6910xx/6911xx
Contributions/Donations/Subsidies 6918xx/6988xx
Public Relations and Social Expenses/Alcoholic Beverages 6932xx
Interest Expense: Internal 6951xx
Losses/Damages/Write-off 6956xx
Transfers (except when management determines it necessary and for amounts to cover interest charges related to external debt financing) 8xxxxx

The proposed operating budget submitted as part of the rate approval process should be in sufficient detail by G/L account to allow a determination that the costs identified above as unallowable costs have been excluded from the billing rates. Questions regarding the allowability of specific costs should be addressed to the Director, Cost Reimbursement and Analysis.

Capital Equipment

Expenditures for capital equipment purchases cannot be included in the costs used to establish service component billing rates. The rates, however, can include depreciation of the equipment. The depreciation expense will be transferred as a betterment to a unique code in the 7479xxx series. Annual amounts credited to this 7479xxx from the service component operating cost center shall not exceed straight-line depreciation on capital equipment and interest expense related to debt financing. Exceptions must be approved by the Associate Vice President, Cost & Reimbursement Accounting.

Depreciation on capital equipment purchased with Federal funds cannot be included in the service component rate calculation.

Funds in these codes should generally be used to support the corresponding service component and not be transferred to other service. Prior approval from the appropriate Management Center must be obtained to use these funds for any other purpose, and approved by Financial Services.

Description G/L Account
Equipment Depreciation – Amount not to exceed straight-line depreciation on capital equipment 6925xx

If equipment depreciation is included in the service component billing rates, a capital equipment listing along with the Duke University inventory identification numbers must be provided to Cost Reimbursement and Analysis. The Service Center Capital Equipment Detail form will assist you in preparing the capital equipment list.

The capital equipment listing will be used to assure that the equipment is excluded from Duke University's Facilities and Administrative (F&A) rate proposal to the Federal Government. The listing will also assist in determining the annual maximum depreciation amount that can be included in the service component rate calculation.

Indirect Cost Expenses (allowable for service components only)

Description G/L Account
General and administrative expense 9011xx
Space rental charges 9009xx
Departmental allocation of internal administration expense if applicable 9013xx/9014xx
Interest expense related to debt financing that is included as a portion of debt service 8017xx

Calculating the Recharge Rate

When calculating your proposed recharge rate you must comply with guidelines from Uniform Guidance:

  • Rates must be based on actual costs.
  • Service centers cannot generate a surplus for a prolonged period.
    • The fiscal year-end surpluses from a service component's operation must be carried forward into the development of the next year's rate calculations. In special circumstances it will be appropriate to spread a year-end surplus over multiple years to avoid significant rate fluctuations. The same guidelines apply to deficits or they can be subsidized by other university funds.
    • A working capital fund balance can be maintained but may not exceed 2-3 months of operating expenditures.
    • Annually the Office of Cost Reimbursement and Analysis (within Financial Services) will prepare a Service Component Profitability Analysis. This analysis utilizes Uniform Guidance methodology to calculate the profitability after excluding unallowables and including Facilities and Administrative expenses (e.g. fixed and moveable depreciation, building O&M costs). Based on this analysis, if a service component continues to generate a surplus over an extended period of time, then action must be taken to ensure Federal grants and contracts are held harmless.
  • Rates must be consistently applied to all users. (Federal grants and contracts must always be charged the lowest rate.)
  • Rates must be based upon the estimated/budgeted number of product units (hours, days, samples, etc.) Rates based upon flat fees per year or a percentage of salary expense that do not relate directly to actual usage are not compliant with federal Cost Accounting Standards (CAS) and are not allowable.
  • Users should be charged directly based upon the actual number of units the user purchased multiplied by the approved recharge rate.
  • Rates must be reviewed annually by the Management Center's appropriate budgetary official and approved by the Associate Vice President, Cost & Reimbursement Accounting.

The Service Center Rate Calculation Form, for service components will assist in the calculation of the appropriate rate for your department. When completing the appropriate worksheet, you must include the following:

  • Rate documentation by G/L account to support identification of allowability or unallowability of costs
  • Billing transaction information that identifies which G/L account is utilized in the charging transaction and what cost center is credited
  • Identification of user base by major category (e.g., Federal grants and contracts, other grants and contracts, instruction, administration, other)

In some cases, it will be appropriate for the service component department to coordinate with Cost & Reimbursement Accounting to develop a "Use Rate Methodology." This "Methodology" will be utilized to assist in justifying recharge rates for service components with numerous rates and complex rate structures.

 

V. SHARED RESOURCE RATE DEVELOPMENT

Account Code Structure

Shared resources, in general, do not have a separate account code structure. However, it is recommended that a unique cost center be established for each shared resource. When possible the 459xxxx cost center series should be used for shared resources to accumulate the costs of providing their services or goods.

Shared resources should use G/L account 6901xx to record the charges to the university unit receiving the service and G/L account 7510xx-7525xx to record the offsetting credit in the operating cost center of the shared resource.

The department is responsible for tracking all appropriate expenses and credits received in order to ensure that the rate charged can be verified and that the consistent application of the rate can be verified.

A sponsored project cannot be used as the recipient of the debits and credits for the tracking of a shared resource.

Establishing New Shared Resource Cost Center

  • Complete the Cost Object Request Form
  • Submit the Cost Object Request Form to the appropriate Management Center
  • Once approved, the Cost Object Request Form will be forwarded to Accounting Systems Administration; they will notify the Management Center when the cost center has been set up.

Development of Shared Resource Recharge Rates

Recharge rates established by shared resources should be based on the actual cost of providing services and not necessarily what independent, for-profit businesses are charging for the same services. In some instances when approved in advance by the respective Management Center administration it may be appropriate to establish rates that are designed to recover less than "full cost." For shared resources which are expected to recover full cost via the recharge mechanism, rates must be within the competitive pricing ranges established by independent for-profit businesses. Rate structure has obvious implications on how costs must be managed within the shared resource.

Full cost for shared resources can only include direct costs (depreciation on capital equipment will be allowable with approval from the appropriate management center and the Associate Vice President, Cost & Reimbursement Accounting.) Certain types of expenses should be excluded from rate determination calculations because they are unallowable for federal reimbursement.

Allowable Direct Costs

Salaries, wages, fringe benefits, supplies and materials, subcontracts, and outside services.

Unallowable Direct Costs

The following may not be charged to the operating cost center and must be excluded from billing rates for all shared resources:

Description G/L Account
Scholarship/Fellowships 63xxxx
Capital Acquisitions 66xxxx
Advertising and Publicity 6902xx
Bad Debts 6910xx/6911xx
Contributions/Donations/Subsidies 6918xx/6988xx
Public Relations and Social Expenses/Alcoholic Beverages 6932xx
Interest Expense: Internal 6951xx
Losses/Damages/Write-off 6956xx
Transfers (except when management determines it necessary and for amounts to cover interest charges related to external debt financing) 8xxxxx

The proposed operating budget submitted as part of the rate approval process should be in sufficient detail by G/L account to allow a determination that the costs identified above as unallowable costs have been excluded from the billing rates. Questions regarding the allowability of specific costs should be addressed to the Director, Cost Reimbursement and Analysis.

Capital Equipment

Expenditures for capital equipment purchases cannot be included in the costs used to establish shared resource billing rates. The rates, however, can include depreciation of the equipment. The depreciation expense will be transferred as a betterment to a unique code in the 747xxxx series. Annual amounts credited to this 747xxxx from the shared resource operating cost center shall not exceed straight-line depreciation on capital equipment and interest expense related to debt financing. Exceptions must be approved by the Associate Vice President, Cost & Reimbursement Accounting.

Depreciation on capital equipment purchased with Federal funds cannot be included in the shared resource rate calculation.

Funds in these codes should generally be used to support the corresponding shared resource and not be transferred to other service centers. Prior approval from the appropriate Management Center must be obtained to use these funds for any other purpose.

For those shared resources that do not recover depreciation as part of the rate charged and do not have a plant fund, capital equipment may be procured on their operating fund as long as the expense is offset by an appropriate funding source.

Description G/L Account
Equipment Deprecation – Amount not to exceed straight-line depreciation on capital equipment 6925xx

If equipment depreciation is included in the shared resource billing rates, a capital equipment listing along with the Duke University inventory identification numbers must be provided to Cost Reimbursement and Analysis. The Service Center Capital Equipment Detail form will assist you in preparing the capital equipment list.

The capital equipment listing will be used to assure that the equipment is excluded from Duke University’s Facilities and Administrative (F&A) rate proposal to the Federal Government. The listing will also assist in determining the annual maximum depreciation amount that can be included in the shared resource rate calculation.

Calculating the Recharge Rate

When calculating your proposed recharge rate you must comply with guidelines from Uniform Guidance:

  • Rates must be based on actual costs.
  • Shared resources cannot generate a surplus for a prolonged period.
    • The fiscal year-end surpluses from a shared resource's operation must be carried forward into the development of the next year's rate calculations. In special circumstances it will be appropriate to spread a year-end surplus over multiple years to avoid significant rate fluctuations. The same guidelines apply to deficits or they can be subsidized by other university funds.
    • A working capital fund balance can be maintained but may not exceed 2-3 months of operating expenditures.
  • Rates must be consistently applied to all users. (Federal grants and contracts must always be charged the lowest rate.)
  • Rates must be based upon the estimated/budgeted number of product units (hours, days, samples, etc.). Rates based upon flat fees per year or a percentage of salary expense that do not relate directly to actual usage are not compliant with Federal Cost Accounting Standards (CAS) and are not allowable.
  • User should be charged directly based upon the actual number of units the user purchased multiplied by the approved rate.
  • Rates must be reviewed annually by the Management Center's appropriate budgetary official and approved by the Associate Vice President, Cost & Reimbursement Accounting.

The Service Center Rate Calculation Form, for shared resources will assist in the calculation of the appropriate rate for your department. When completing the appropriate worksheet, you must include the following:

  • Rate documentation by G/L account to support the identification of allowable and unallowable costs
  • Billing transaction information that identifies which G/L account is utilized in the charging transaction and what cost center is credited.
  • Identification of user base by major category (e.g., Federal grants and contracts, other grants and contracts, instruction, administration, other)

In some cases, it will be appropriate for the shared resource department to coordinate with Cost & Reimbursement Accounting to develop a "Use Rate Methodology." This "Methodology" will be utilized to assist in justifying recharge rates for shared resources with numerous rates and complex rate structures.

 

VI. APPROVAL OF RECHARGE RATES

Service center recharge rates should be submitted to the appropriate Management Center annually (by May 1st for use beginning in the next fiscal year) along with the proposed operating budget for the service center. A description of the methodology used to determine the rate(s) and all calculations necessary to determine the annual budgeted "expense credit" (as detailed in the previous section) must be included with the recharge rate(s). The Service Center Rate Calculation Form will ensure that all pertinent information is included to support the review and approval of the service center rates.

All recharge rates must be approved by the appropriate Management Center prior to submittal to the Associate Vice President, Cost & Reimbursement Accounting. All recharge rates must be approved by the Associate Vice President, Cost & Reimbursement Accounting or designee prior to their use.

 

VII. APPLICATION OF APPROVED RECHARGE RATES

Recharge rates must be consistently applied to all University and Health System users. The proposed operating budget submitted as part of the rate approval process should be in sufficient detail to allow for the determination that rates are designed to apply uniformly to all service users.

The service center should charge users within ten calendar days following the end of the fiscal month in which the service or activity was provided (based on the unit billed by the service center). A detailed invoice should be provided to the users on a timely basis. The invoice must provide adequate, mathematically accurate support for the activity billed. The invoice should be prepared in sufficient detail to withstand auditor review. Service center managers should use the following examples of information as a guide for preparing an accurate invoice:

  • Service center description/cost center number;
  • User/customer (noting the cost center or project/WBS element);
  • Description of service provided or products purchased;
  • Units of service or product multiplied by the appropriate rate;
  • Total charge to user;
  • Date service or product was provided.

The invoice must be at a sufficient level of detail to support effective reconciliation of a cost object in accordance with GAP 200.012, Reconciliation of Financial Transactions.

In the event that a service center attempts to charge a sponsored research code that is in the process of being closed out, the disposition of the charge will be determined by the Associate Vice Provost for Research and the School of Medicine, Associate Dean, Administration. Reasonable attempts to include the billing to the sponsored research project will be made, however, this may not be possible. If the sponsored research project can no longer be billed and the service center did not bill within the GAP guidelines, the backstop department for the service center will be responsible for the charge. If the sponsored research project can no longer be billed and the service center did follow GAP guidelines for billing, then the requesting department will be responsible for the charge.

Advanced billing for services or products is not allowed. Service centers can only bill for services performed or products purchased. Service center management must retain all supporting documentation for each billing for user and internal or external audit requests.

 

VIII. CHARGES TO EXTERNAL USERS

Because sales of goods or services to persons and organizations outside the University community may raise legal, tax, accounting and community relations issues, managers of service centers must adhere to the supplemental guidance “Participation of Duke Research Support Centers in Research Projects Managed by External Entities (1/20/2014)”. This guidance on how the project should be conducted is also included in the supplemental guidance.

Any exceptions or variations from the supplemental guidance require prior, written approval by the Vice Dean for Basic Sciences (for Research Support Centers within the School of Medicine and School of Nursing), or by the Vice Provost for Research (for other parts of the University).

Additionally, service centers should not make direct solicitation of external sales or advertisements aimed at the general public.

 

IX. ROLES AND RESPONSIBILITIES

Service Center Management:

  • Responsible for preparing and administering the service center budget, annually preparing rate schedule(s), maintaining adequate records (ex: daily logs), and accurately invoicing users on a timely basis.
  • Determine the proper rate development methodology incorporating historical data, projected data, or both.
  • Responsible for preparing and supporting a schedule of rates for services or products charged to users of the service center. The rate schedule should be submitted for approval from the appropriate Management Center by May 1st each year for the fiscal year beginning the following July.
  • Must ensure that Federal and non-Federal users are charged the same rate and it is consistent with rate schedule.
  • Must be able to support internal and external audit requests and show satisfactory accounting and management control. The service center management must maintain, at a minimum:
    • Documentation supporting rate calculations;
    • Documentation supporting use or level of activity (daily logs);
    • Invoicing records identifying services provided to each user.

Management Centers:

  • Oversee and assist in the formation of new service centers.
  • Monitors service center activity to avoid the duplication of services offered.
  • Annually reviews and approves service center budgets and rates.
  • Informs Cost & Reimbursement Accounting of any changes to active service centers.
  • Forward all approved service center rate calculations to Cost & Reimbursement Accounting.

Cost & Reimbursement Accounting will:

  • Maintain current rate forms and instructions.
  • Provide guidance to university personnel.
  • Review service center rate calculations on an annual basis to determine if the individual calculations are in compliance with Uniform Guidance and Duke University service center general accounting procedures.
  • Prepare a Service Component Profitability Analysis. This analysis utilizes Uniform Guidance methodology to calculate the profitability after excluding unallowables and including Facilities and Administrative (F&A) expenses (e.g. fixed and moveable depreciation, building O&M costs). Based on this analysis, if a service component continues to generate a surplus over an extended period of time, then action must be taken to ensure federal grants and contracts are held harmless.
  • Sample service center billings to ensure that current approved rates are used when recharging costs to users, users are invoiced within ten calendar days following the end of the fiscal month in which the service or activity was completed, and service centers are maintaining proper documentation to support recharges (ex: daily logs, receipts, etc.).

 

Note: This guidance is administrative in nature and is not a cost reimbursement policy. Failure to comply may or may not result in adjustments of charges to the award. Noncompliance with this policy does not mean this cost is unallowable from an external perspective. Any adjustments of charges will be as required under applicable federal cost reimbursement principles. If a cost is removed from an award for any reason, whether or not related to this guidance, the cost will generally be charged to departmental funds.