Research Service Centers†††††††††††††††††††††††††††††††††††††††††††††††† UPPS No. 03.04.09
Issue No. 1
Effective Date: 08/21/2013
Review: September 1 EY
01.†††††† POLICY STATEMENTS
01.01† This UPPS provides a framework for the approval and fiscal operations of Texas State University research service centers (RSCs) that will ensure compliance with federal cost principles, consistency in accounting and costing practices, and flexibility to meet the needs of different operations. Although there is a wide variation in size, complexity, and services provided by RSCs, they should all maintain common administrative practices.†
01.02† As a recipient of federal funds, Texas State complies with Circular A-21, Cost Principles for Educational Institutions published by the U.S. Office of Management and Budget (OMB).
Generally, the university follows the OMB guidelines for all sponsored projects, regardless of the funding source.
02.†††††† GENERAL GUIDELINES
02.01† An RSC is an operating unit within the university that provides goods and services primarily to other university units (especially to the universityís sponsored programs) and secondarily to external users for a fee.
The cost of providing products or services is allocated to users including federally-sponsored agreements by applying established recharge rates to the actual usage of services.†
RSC targets breaking even on each unit sold through proper rate setting, budgeting, and billing practices.
02.02† Deans, directors, department chairs and individual faculty may propose the creation of an RSC. See Section 06. for the initial RSC proposal and approval process. Staffing of duties shall be at the direction of each unit head and shall follow salary projections used in the rate calculation.
The benefits of a proposed RSC must be weighed against the benefits of obtaining similar services or products from commercial or other university services. In contemplating the creation of an RSC, the following should be considered:
a. How is this proposed RSC related to the instructional, research, or public service mission of the university?
b. Does the expected level of billed costs justify the establishment of an RSC?
c. Does another unit at Texas State already provide similar services?
d. Will the RSC be competing with an entity in the public sector?
02.03† The estimated revenue for an activity should exceed $10,000 per year in order to be approved as an RSC.
03.†††††† USERS OF RESEARCH SERVICE CENTERS†††††††††††
03.01† Internal users are university accounts with a 10-digit fund number starting with 1-8. These include academic, research, administrative, and auxiliary accounts that purchase RSC products and services in support of Texas Stateís mission.
When an RSC account manager is also a principle investigator, his grants or contracts are considered to be customers when they use the RSCís output.
a. All internal users must be charged the same rate for operating costs for the same level of service under the same circumstances.
b. All internal users must be charged the same rate for depreciation except academic departments using the equipment for instructional use.
1) For reconciliation purpose, the revenue for unbilled units used should be imputed.
2) Academic departments using the equipment for instructional use may be charged the rate for depreciation if approved by the associate vice president for Research (AVPR).
03.02† External users are users other than internal users as defined in Section 03.01. They include agency accounts (with a 10-digit fund number starting with 9), students, and faculty and staff acting in a personal capacity, and third parties including companies owned by Texas State faculty or staff. Other universities are also considered external users unless Texas State has made them sub-recipients of a grant or contract; then they will be considered an internal user.
†04.††††† RATE COMPONENTS
There are two components to the recharge rate: the operating cost rate and the depreciation recovery rate. The recharge rate is charged to all customers, both internal and external, except when depreciation is imputed for academic departments.
Rates for external customers will also include a surcharge based on the universityís Facilities & Administration (F&A) rate and possibly a market differential. External customers will be quoted and charged a single consolidated rate for each product or service.
04.01† Operating Cost Rate: Only allowable costs that will be incurred by the RSC may be included in the operating cost rate. All costs must be reasonable, allowable, allocable, and consistently treated.
a.†† The portion of total salaries and wages related to the time of non-administrative personnel spent directly involved in the centerís activity and which are not already paid through a grant or contract must be included in the rate calculation and charged to the centerís operating account.
1) If an employee works directly on more than one service line, the costs associated with that employee must be allocated to the service lines based on proportional time spent.
All direct employee time should be tracked and factored into the rate calculation for each service provided.
2) When charging on an hourly basis, the total maximum hours available for a full-time employee is 2080 per year adjusted for state holidays, vacation, sick leave, downtime, etc.†
A detailed explanation of the factors considered and calculations used in arriving at a value for estimated downtime must be included in the rate development justification.
b.†† Employees involved in the administration of the center are only included in the operating costs and related rates when their time can be accurately measured and their salaries are not already included in the F&A rate calculation. Salaries for departmental administrative and support staff shall be budgeted and charged to departmental accounts and not the RSC.
c.†† Faculty salaries are included in user rates if they are budgeted and paid from the RSC operating account and supported through documented effort reporting.
d.†† Fringe benefits related to all personnel costs directly charged to the RSC should be included in the rate calculation.
e.†† The cost of materials and supplies necessary for the operation of the RSC may be budgeted and included as allowable costs of the RSC. All materials and supplies charged must be clearly identifiable with the RSCís activities and be under the control of the RSCís staff.†
f.†† If the RSC uses space not owned by the university, lease costs should be included in the rate development. Any costs for janitorial, building maintenance, and other operations and maintenance not covered by the lease costs should also be included.
g. ††Other expenses to be included in RSC direct operating cost rates include service contracts, equipment operating leases, professional services and travel expenses related to RSC business.
h.†† Equipment with a purchase price under $5,000 is not capitalized and may be included in the rate calculation as an operating expense.
Capital equipment (defined as an item with a purchase price over $5,000 and a useful life of at least a year) is not purchased from the RSCís operating account, so the cost is not included in the operating cost rates. See Section 04.02 for recovery of the costs of capital equipment via depreciation recovery rate.
j.††† Unallowable costs must be excluded from the rate calculations as well as the operating budget and expenditures. These include but are not limited to:
1) Advertising and public relations costs
2) Alcoholic beverages
3) Bad debts or uncollected billings
4) Contingency provisions
5) Cost of capital assets
6) Entertainment costs
7) Equipment replacement provision beyond depreciation recovery
8) Fines and penalties
9) Goods and services for personal use
10) Insurance and indemnification
11) Memberships, subscriptions, and professional activity costs of a social or individual nature
13) Selling and marketing costs
14) Start-up expenses
15) Unrelated business income tax (UBIT)†
Refer to Section J, OMB Circular A-21 for a complete list of unallowable expenses.
04.02† Depreciation Recovery Rate: The cost of eligible capital equipment in the RSC may be recovered by including depreciation as a component of the recharge rate.†
Using replacement value as a component of user rates is not permitted by OMB A-21. Therefore RSCs cannot include the future cost of capital expenditures in their recharge rates.
Equipment cannot be included in the depreciation rate for Federal grants and contracts in the following instances:
a. Equipment already in the universityís F&A rate;
b. The portion of equipment purchased by a federally-sponsored agreement, whether or not title has reverted back to the university; and
c. The university-funded portion of equipment purchased under a specific cost-sharing agreement.
The equipment excluded from depreciation for non-federal users is equipment already in the universityís F&A rate and equipment purchased by a federally-sponsored agreement where title has not reverted to the university.
04.03† Surcharge: The rates charged to external customers should include a surcharge equivalent to the universityís approved F&A rate.
A surcharge less than the approved F&A rate (adjusted surcharge) must be approved by the AVPR. The surcharge rate shall be charged to all external customers for that product or service.
University accounts (including sponsored programs) are not subject to the surcharge. However, RSC charges to university grants and contracts will be subject to the applicable F&A rate.
04.04† Market Differential: External user rates should not be so low as to constitute unfair competition with private enterprise for similar services available in the area. A market differential beyond the surcharge equivalent to the approved F&A rate may be approved by the AVPR.
05.†††††† CALCULATING RESEARCH SERVICE CENTER RECHARGE RATES
05.01† Components of RSC operating rate calculations are the estimated demand for products and services and the anticipated costs associated with providing those products and services.
The formula used for calculating the rate for each service or product is:
Operating Rate = Budgeted Operating Costs Ī Prior Year Adjustment / Total Annual Units of Activity
a.†† The usage base is the volume of work expected to be performed, expressed in units such as labor hours, machine hours, CPU time, or any other reasonable measurement. An RSC may have different measurable units for each type of product or service it offers.
b.†† User rates must be supported by cost calculations based on historical costs and service levels. Estimated rates may only be used in the first year of service. An adjustment for known or anticipated changes in service levels or services should be clearly documented.
c.†† Established RSCs should include any surplus or deficit from the prior year operations when calculating operating rates.
d.†† RSCs providing multiple services may not subsidize the operating cost of certain service by charging rates in excess or operating costs for other services.
05.02† Depreciation on eligible capital equipment should be calculated on a straight-line basis with no salvage value, using the same useful life schedule used by Financial Services.
Depreciation Recovery Rate = Annual Depreciation/Total Annual Units of Activity
Using replacement value as a component of user rates is not permitted by A-21. Therefore, RSCs cannot include the future cost of capital expenditures in internal user rates.
06.†††††† INITIAL RESEARCH SERVICE CENTER PROPOSAL AND APPROVAL PROCESS
06.01† A Request to Establish a RSC form (Attachment I) should be submitted to the AVPR for initial review. The request requires the approval (Attachment II) of the department chair or school director (if applicable) and the dean or vice president. It also requires a guarantee account that will be responsible for deficits that might be incurred by the RSC.
06.02† The AVPR will review the request in light of the criteria established in Section 02.02 above. If approved, the request will be forwarded to the proposed RSC manager and the director of the Office of Sponsored Programs (OSP) for rate development.
06.03† The director of OSP will assist the proposed RSC manager to develop recharge rates for each activity (product or service).† Recharge rate calculations will be used to develop the budget for the RSC.† The director of the Office of Commercial and Industrial Relations (OCIR) will review and negotiate with the RSC manager any changes to the rate and make the final determination of the rate.
The final recharge rates and budget will be sent to the AVPR as well as the proposed RSC manager, the chair/director, the dean/vice president, and the General Accounting Office.
06.04† The AVPR will review and approve the final budget and recharge rates. He or she will also approve whether an RSC will serve external customers and the rate to be charged those customer.†
If the rate charged to external customers includes a surcharge less than the universityís full F&A rate, the AVPR will have to approve the surcharge.
07.†††††† RATE REVIEWS
07.01† Annual Budget Development: RSC account managers are required to evaluate the RSCís financial position and rates during the annual budget development cycle (done in April for the subsequent fiscal year starting September 1).
07.02† Year-End Rate Performance Review: Thirty days after the fiscal year ends on August 31, RSC account managers will submit their actual usage and financial results to the director of OSP, director of Commercialization Services, and the AVPR.
07.03† Mid-year rate adjustments are allowable as needed to accommodate changing circumstances or to correct for a foreseeable deficit or surplus. Changes in rates must be approved by the AVPR.
08.†††††† BILLING PROCEDURES, REPORTS, AND RECORDS
08.01† All customers must be billed consistently and accurately for services received. User bills may only be prepared after services have been rendered and must have sufficient detail to identify the services provided.† Billings must be based on measured and documented use using the rate currently in effect at the time of the service. Billings must be prepared no less frequently than monthly and must be submitted to Financial Reporting & Analysis no later than the fifth working day of the month following the performance of the service.† Refer to the Financial Reporting & Analysis website for billing procedures and forms.
a. Billings to Texas State internal customers (grants, departmental accounts, individual professor accounts, etc.) are processed through Interdepartmental Transfers (IDTs). Sufficient detail must be included to identify the services provided, billing rates, and usage.
b. Billings to external users are processed on an invoice which identifies the services provided, usage, using the rate currently in effect at the time of the service. RSCs must use the standard university format provided by Financial Reporting & Analysis. Modifications to the standard invoice template may not be made without approval from Financial Reporting & Analysis.
c. A customer should not be billed until services have been rendered. RSCs should administer billings on a timely and consistent basis to ensure that twelve months of cost recovery are associated with twelve months of incurred cost, providing a basis for evaluating user rates and reserves.
The RSC account manager is responsible for monitoring and collecting accounts receivable from external customers.
08.02† RSCs must record the goods and services requested and provided; the direct operating costs of providing those services; revenues, billings and collections; and the annual surplus or deficit. Examples of documents that must be maintained are:
a. Work papers showing how the rates were calculated.
b. Approval of rates
c. Records supporting the level of activity such as usage logs
d. Time keeping
e. Billing records that identify the service provided to each user
f. Depreciation schedules
Records should be maintained by the RSC for a minimum of ten years.
09.†††††† ACCOUNT STRUCTURE, RESERVES, AND TRANSFERS
09.01† Each RSC will have a unique cost center/fund center.
09.02† RSCs may have multiple funds in which to record revenues and expenditures, depending on their customer base. The combination of a cost center/fund center and fund makes up a unique account.
a. The RSC Operations Fund account is used to budget for and record operating expenditures (as defined in Section 04.01.a) as well as the revenues based on the operating rate charged to all customers.
1) The RSC Operations Fund may accumulate a working capital reserve.
2) Available reserves are considered a surplus balance.† Surplus balances will be reduced either by rate reductions or refunds to all internal customers or both.† Surplus amounts will not be used to start up new services within the RSC or transferred to subsidize other university operations including other RSCs.
3) Deficits of annual operating expenses must be used to adjust rates up for the next year.†
Deficits of expenses must be funded by another
non-federal source and transferred into the centerís account.†
b. The RSC Depreciation Fund is used to record the revenue based on the Depreciation Recovery Rate as defined in Section 04.02. It is only budgeted for expenditure when capital equipment is going to be replaced, contributing the depreciation recovered.
c. RSC Above Direct Cost Fund is used to record the revenues from the Surcharge based on F&A rates (as described in Section 04.03) and all of the revenues base on Market Differential (as described in Section 04.04).
1) The primary consideration of this account is funding future capital equipment replacement beyond depreciation recovery. Accordingly, revenues may not be fully budgeted.
2) This account may be budgeted for specific costs not allowed in the RSC Operations account by OMB A-21:
a) Advertising and public relations costs
b) Bad debts or uncollected billings
c) Contingency provisions in excess of working capital
d) Indirect costs
e) Selling and marketing costs
f) Unrelated business income tax (UBIT)
3) This account may be used to support the needs of the RSC.
09.03† The relationship between rates, funds and costs are shown in the RSC Rate Component and Account Matrix (Attachment III).
09.04† The institutional share of the surcharge revenue will be deposited into a surcharge account managed by the provost. Uses of this account include:
a. Funding the difference between equipment recovery and equipment replacement
b. Subsidies for academic department
c. Imputed use where some part of the costs are not paid by the user
d. Start-ups for new RSCs or lines of service which are strategic or significant to the university
e. The institutional costs of administering RSCs.
10.01† RSC Account Manager
a. Ensures only allowable costs are included in the billing rates and charged to operations accounts.
b. Assists with the development of recharge rates in accordance with A-21 and university policy.
c. Monitors and collects accounts receivable from external customers.
d. Evaluates the RSCís financial position and rates during annual budget development cycle (see Section 07.01) and year-end rate performance review (see Section 07.02).
e. Maintain records (see Section 08.02).
10.02† Associate Vice President for Research
a. Approves RSC proposals for rate development.
b. Reviews and publishes rate changes approved by the director, Commercialization Services, OCIR.
10.03† Office of Sponsored Programs
a. Assists RSC managers in developing recharge rates.
b. Reviews recharge rates and surcharges, RSC budgets (including surcharge accounts), and the creation of income-generating accounts.
c. Reviews new or changed billing rates and units sold.
d. With OCIR, conducts periodic reviews of the financial operations of existing service centers.
e. Ensures that RSC rates are properly built into sponsored agreement budgets and charged to the sponsored agreements.
10.04† Office of Commercial and Industrial Relations
a. review and negotiate with the RSC manager any changes to the rate
b. final determination of the rate
c. conducts periodic reviews of the financial operations of existing RSCs
11.†††††† REVIEWERS OF THIS UPPS
11.01† Reviewers of this UPPS include the following:
Associate Vice President for Research†† September 1 EY
& Director of Federal Relations
Director, Office of Sponsored††††††††††††††††††† September 1 EY
Director, Office of Commercial and††††††††† September 1 EY
Director, Accounting†††††††††††††††††††††††††††††††††† September 1 EY
12.†††††† CERTIFICATION STATEMENT
This UPPS has been approved by the following individuals in their official capacities and represents Texas State policy and procedure from the date of this document until superseded.
†Associate Vice President for Research & Director of Federal Relations; senior reviewer of this UPPS
Provost and Vice President for Academic Affairs