GAP 200.300, Service Center Administration

I.     General

II.    Definitions and Accounting Structure

III.   Objectives

IV.   Establishing a New Service Center

V.    Recharge Rate Development

VI.   Approval of Recharge Rates

VII.  Application of Approved Recharge Rates

VIII. Charges to External Users

IX.   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 Cost Reimbursement & Analysis and the appropriate Management Centers.

 

II. Definitions and Accounting Structure

Service Centers are organizational units that provide and bill for specific technical or administrative services and occasionally related goods (all of which are hereafter referred to as “services”) primarily for the benefit and convenience of Duke University and Health System faculty, staff and students. Services to external users may be provided in accordance with specific guidelines (see Section VIII).

Service Centers charge the user directly for these services using rates based on costs incurred. There are a few different types and treatments of Service Centers at Duke.

Research Service Centers

Service Centers in the School of Medicine, Provost Area, and DUHS, also referred to as “shared resources”, provide scientific and technical services that do not represent the major purpose of the generating department. They can provide services not only to their own department but to others as well.  Examples include an electron microscope or an instrumentation shop.

Central Administration Service Centers

Service Centers in the Central Administration Management Center provide administrative or operational services to the University and Health System.  Examples include Convenience Copiers and Duke Temporary Services.

Animal Research Facilities

Animal Research Facilities, or vivariums, are considered unique entities by the Federal government and are subject to special requirements outlined in the Cost Analysis and Rate Setting Manual for Animal Research Facilities (CARS).

Accounting Structure

*In the Health System, the unit receiving the service will record the costs under the natural G/L account cost classification, and the Service Center-specific 7xxxxx G/L account is used only for the credit to the Service Center.

 

III. Objectives

The objectives of a Service Center include the following:

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

 

IV. Establishing a New Service Center

Establishment of a new Service Center should result from an identified need in the Duke community. New Service Centers should assess the administrative and financial considerations of their proposed operation, as well as scientific value for Research Service Centers. Interested parties should first engage with their business manager to work with the appropriate Management Center.

 

V. Recharge Rate Development

Recharge rates established by Service Centers should be based on the actual cost of providing 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." 

Full costs can include all allowable direct costs, depreciation on capital equipment as outlined below, and, with prior approval, space and general and administrative expenses. 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, equipment maintenance and repair, service agreements and other contract work, and other operational expenses.

Unallowable Direct Costs

The following must be excluded from billing rates for all Service Centers:

Description	G/L Account
Supplemental Fringe Benefits	610100
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	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 appropriate Management Center.

Equipment Leases

Financing leases (where the life of the lease approximates the useable life of the equipment and ownership transfers to Duke at the end of the lease term) and Operating leases (where ownership of the equipment does not transfer to Duke at the end of the lease term) are allowable expenses. Installment purchases (where the life of the lease does not approximate the useful life of the equipment) are not allowable expenses.

Any service center considering entering into an equipment lease should first contact the Associate Dean for Finance (for SOM) or Associate Controller, Financial Reporting (for other parts of the University) to assure allowability and proper accounting. An approval from Financial Accounting and Reporting should be provided to Cost Reimbursement & Analysis for final approval in the service center’s rates.

Capital Equipment Depreciation

Expenditures for capital equipment purchases cannot be included in the costs used to establish Service Center billing rates. The rates, however, can include depreciation of the equipment with approval from the appropriate Management Center and Cost Reimbursement & Analysis and under specific circumstances:

• the equipment was not purchased with Federal or Federal-prime funds;
• the Service Center is able to fully recover the depreciation costs in its rates and without departmental or school subvention;
• the percentage of depreciation included for a given piece of equipment must equal the Service Centers usage of that equipment, verified either by percentage of the room assigned to the Service Center where the equipment is located or by another measurable method such as a time log of usage;
• the depreciation was not included for reimbursement through the most recent Facilities and Administrative cost rate negotiations.

The depreciation expense should be booked on the Service Center’s operating code and the offsetting credit to a unique code in the 747xxxx series. Amounts booked should not exceed straight-line depreciation on capital equipment as calculated by Plant Accounting.

Once depreciation is included in the Service Center’s rate calculation for a given year, it MUST be booked in full, even if it puts the Service Center into a deficit situation.

Description	G/L Account
Equipment Depreciation	6925xx (debit)/80xxxx(credit)

If equipment depreciation is included in the Service Center billing rates, a capital equipment listing along with the Duke University inventory identification numbers must be provided with the rate proposal.

Indirect Cost Expenses (allowable with prior approval only)

Description	G/L Account
General and administrative expense	9011xx
Space rental charges	9009xx
Departmental allocation of internal administration expense	9013xx/9014xx

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 must manage any surplus as follows:
  • Service Centers should perform a profitability analysis annually (excluding transfers and unallowable expenses) to determine any surplus.
  • The calculated surplus balance may not exceed 3 months of operating expenditures to allow working capital for operations.
  • Any calculated surplus in excess of 3 months working capital should be carried forward into the development of the next year’s rate calculations.
• 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.

The Service Center Rate Calculation Form will assist in the calculation of the appropriate rate for your Service Center. A description of the methodology used to determine the rate(s) and all calculations necessary to determine the annual budgeted recharges must be included with the proposed recharge rate(s). The proposed operating budget should be in sufficient detail to allow for the determination that rates are designed to apply uniformly to all service users. Service centers with particularly numerous rates or complex rate structures can coordinate with their Management Center or with Cost Reimbursement & Analysis to customize the rate calculation form to fit their needs.

 

VI. Approval of Recharge Rates

Service Center recharge rates, along with the proposed operating budget for the Service Center, should be submitted to the appropriate Management Center annually for use beginning in the next fiscal year. With prior approval, a one-year carryforward of rates may be requested if no rate changes are required and operations are stable. 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.

Recharge rates are reviewed and approved by the appropriate Management Center and by Cost Reimbursement & Analysis. Service Centers cannot use new rates until they have received notification of all approvals from the Management Center.

 

VII. Application of Approved Recharge Rates

Recharge rates must be consistently applied to all University and Health System users (Federal grants and contracts must always be charged the lowest rate).
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. A detailed invoice should be provided to the users on a timely basis. The invoice must provide adequate support for the activity billed. The invoice should be prepared in sufficient detail to withstand auditor review. 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. 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.

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 Office of Research & Innovation (OR&I).  If the sponsored code is within the School of Medicine or School of Nursing, the School of Medicine, Associate Dean, Space Management and Research Resources must also approve the disposition of the charge. 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.

Advance 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

Research Service Centers are established to support academic research projects conducted by Duke researchers and bona fide collaborative research projects in which Duke researchers are collaborating with researchers external to Duke under negotiated research agreements handled through Duke’s normal grants and contracts process. These projects will have a Duke cost center or WBSE for billing.

Research Service Centers are not established with the primary aim of supporting research conducted by external entities, or to provide those entities with functions that are readily available from commercial organizations considering factors such as quality of work, technical expertise and proximity. However, as part of Duke’s educational, research, and health care missions, a Research Service Center may provide services for external users under certain limited conditions. No direct solicitation of external sales or advertisements aimed at external users or the general public are allowed.

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 additional guidance when working with external entities outside the parameters of negotiated sponsored research agreements.

Work with external entities is allowed only if the following are all true:

1. The Research Service Center has capacity beyond that needed for Duke research projects and bona fide collaborative research projects under negotiated research agreements handled through Duke’s normal grants and contracts process. A backlog of requests from Duke researchers will demonstrate that this condition has not been met.
2. The work will be fundamental research carried out for a scientific purpose and conducted for a “Permissible User” defined as a tax-exempt scientific or medical research organization, a tax-exempt educational institution, or a governmental entity.
3. Duke must be free to use the results of the work for its own educational, research and health care purposes, including for the advancement of the knowledge and skills of its students and employees.
4. The work must be done under Duke’s standard Research Analysis Quotation and Agreement (RAQA). In general, these agreements will not be negotiated. The Research Service Center must not accept the Permissible User imposing its own terms, or having the Permissible User’s purchase order supersede the terms of the RAQA. If a Research Service Center thinks the RAQA template should be revised to more accurately reflect the type of work conducted by that Service Center, then they should contact the appropriate Pre-Award Office for consideration of appropriate revisions.
5. RAQAs will be entered into for single, short-term projects only (analyses completed within 90 days with an additional 30 days for reporting results). The Research Service Center will not enter into “blanket” or “master” agreements under which multiple or longer-term projects would be conducted.
6. External work will be charged to the Permissible User at the Research Service Center’s approved recharge rate plus an amount not less than Duke’s current approved facilities and administrative (“F&A”) charge. This amount should be calculated into the per sample charge.
7. The external work must be conducted by Duke personnel under the direction of Duke in accordance with all applicable Duke policies. The project shall not be structured as or provide a right to space rental, lease or other direct use of Duke facilities by the Permissible User.
8. The Research Service Center must maintain accurate records of all external work including copies of the signed RAQA for each project.

Research Service Centers may not provide services for commercial entities without prior written approval by the Vice Dean for Basic Sciences (for SOM), or by the Office of Research & Innovation (for other parts of the University) in consultation with the Office of Counsel.  This includes research carried on for the primary purpose of commercial or industrial application or activities of a type ordinarily carried on as an incident to commercial or industrial operations, for example, the ordinary testing or inspection of materials or products, or the designing or construction of equipment.

Any exceptions or variations from this guidance require prior, written approval by the Vice Dean for Basic Sciences (for Service Centers within the SOM), or by the Office of Research & Innovation (for other parts of the University).

 

IX. Roles and Responsibilities

Service Center Management:

• Prepare and administer the Service Center budget, maintain adequate records, and accurately invoice users on a timely basis, all in accordance with Duke and Federal regulations.
• Prepare and support a schedule of rates for services or products charged to users of the Service Center
• Ensure that Federal and non-Federal users are charged the approved rate(s).
• 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;
  • RAQAs for all external users.

Management Centers:

• Oversee and assist in the formation of new Service Centers.
• Provide guidance on compliance and management concerns.
• Monitor Service Center activity for compliance with Duke and Federal regulations.
• Annually review and approve Service Center budgets and rates before forwarding to Cost Reimbursement & Analysis.
• Inform Cost Reimbursement & Analysis of any material changes to active Service Centers.

Cost Reimbursement & Analysis:

• Maintain current Service Center Rate Proposal Form.
• Work with Management Centers to provide guidance on compliance and management concerns.
• Monitor Service Center activity for compliance with Duke and Federal regulations.
• Annually review and approve rate proposals for Service Centers to determine compliance with Uniform Guidance and Duke University Service Center General Accounting Procedures.
• Monitor Service Center activity for profitability utilizing Uniform Guidance methodology.
• Recommend any action needed to ensure Federal grants and contracts are not charged in excess of cost.

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.