Subject: SERVICE CENTERS
Effective Date: January 1, 1995
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Purpose:
To outline policies and procedures governing Service Centers, as defined.
Scope:
All Service Centers providing specialized services to customers. Some users of Service
Centers may be engaged in organized research which may be funded in whole, or in part, by
Federal funds.
Policy:
It is the policy of Case Western Reserve University to aggregate the costs of Service
Center functions and to charge customers in accordance with Federal Circular OMB A-21,
and with Cost Accounting Standards Board rules; and to ensure that such charges are
consistent with services received and in accordance with published guidelines.
A separate billing rate must be established and approved for each service center every
two years.
Definition:
Service Center - Service Centers are defined as University facilities which
provide highly specialized services (such as Animal Resource Center). Service Centers
whose gross annual direct and indirect expenditures exceed $500,000 must have fully loaded
rates. Service Centers which do not meet this threshold will be required to establish
billing rates based on their direct expenses. All Service Centers must be established as
operating accounts.
Stockrooms and other similar activities which are established as an auxiliary
enterprise, or operated by an outside vendor based on competitive pricing are not included
in this definition.
Exceptions to this policy for Service Center definitions must be approved by the
Offices of Budget & Planning and Controller, and the related activities must be
included as a part of the annual budget process.
ACCOUNTING POLICY & PROCEDURE MANUAL
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Procedure:
1.) Submission of Proposal
Departments requesting approval of Service Center rates should complete a Service
Center Information Sheet (Exhibit A) and submit it together with an annual budget and
proposed rate structure (Exhibit B) to the Controller's Office. This documentation
provides appropriate University personnel with the opportunity to review the proposed cost
components and resulting rates prior to the implementation of charge back transactions.
A separate Service Center account should be used to process all expense and cross
charges to departments. Expense classes 8260 and 8810 must be used to record cross charges
in the Service Center account for internal and external users respectively.
2.) Service Center Budgeting
The budget submitted with the proposal should conform to that which has been approved
for the current fiscal year. The budget and proposed rates may not contain any element of
profit for specific services nor may the charge backs result in an overall profit.
The budget and the proposed rate schedules will necessarily include estimates. Any
differences at the end of a fiscal year between actual expenditures or usage, and the
estimates used, will be carried forward into subsequent fiscal years, and prospective
rates should be adjusted upward or downward accordingly.
3.) Developing Billing Rates
Proper rate development requires an accurate composition of allowable costs. Billing
rates must be developed from costs and may not be based upon market rates or those sourced
from other universities.
The first step in rate development is to separate direct costs from indirect costs. The
second step is to identify those costs which must be recovered over a number of years, and
to exclude costs which are unallowable.
ACCOUNTING POLICY & PROCEDURE MANUAL
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Direct Costs are those costs which are directly identifiable with the end
product or service of the Service Center. Direct costs include:
- Salaries, wages and related fringe benefits
- Supplies and materials
- Other miscellaneous costs (Telephone, postage, etc.)
- Subcontracts and outside services
Indirect Costs are those costs which are not directly identifiable with the end
product or service of the Service Center, but are part of the University's cost of
operating the Service Center. These costs should be obtained from the Controller's Office
and incorporated in the billing rates of the Service Center. Indirect costs include:
- Depreciation/use allowance on buildings and equipment
- Operations and maintenance costs
- General and administrative costs
- Interest paid to outside parties
A Service Center may budget and incur some costs in its operation which are not
allowable
according to Federal standards. In establishing a billing rate, the following costs may
not be recovered from customers:
- Alcoholic beverages
- Alumni activities
- Bad debts
- Defense and prosecution of criminal and civil proceedings, claims, appeals and patent
infringements
- Donations and contributions
- Entertainment
- Executive and legislative
- Fines and penalties
- Goods or services for personal use of employees
- Memberships in any civic, community, or social organization or country club
- Trustees' travel
Costs which must be collected over a number of years include:
- Depreciation/use allowance on buildings
- Costs of equipment costing more than $500
- Interest payments on debt issued to purchase buildings and equipment
ACCOUNTING POLICY & PROCEDURE MANUAL
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Once the allowable pool of costs (direct plus indirect plus equipment and interest on
debt to purchase equipment) has been determined, the billing rates may then be calculated.
Billing rates are established by dividing the costs by an appropriate usage basis. The
usage basis will be dependent upon the type of service provided. The base should be one
which incurs expenses in proportion to the unit of measurement such as CPU seconds or
hours expended.
A sample of a rate setting is included in Exhibit B.
4.) Charging Customers For Services
Where Services are provided to non-University customers, any anticipated revenue to be
generated must be taken into consideration when establishing chargeout rates. In no case
may rates for outside users be less than rates charged to internal users. To do so would
be tantamount to having Federal sponsors subsidize non-Federal customers.
Under the Cost Accounting Standards, rates charged to University customers must be
consistent across departments and management centers.
In select circumstances, the department may, for business reasons, set some rates at an
amount which is less than the cost incurred in providing the service. In these cases, the
funding for such a shortfall becomes a budget issue. Where Case Western Reserve University
customers are charged less than cost, the Controller's Office will calculate the amount of
revenue lost and include it in determining the deficit/surplus for the year.
5.) Processing Charges and Documentation
Charges to Case Western Reserve University departments and affiliates should take the
form of automatic journal entries which should be prepared and submitted to General
Accounting for processing as soon as is practical after the service is rendered.
Service Centers are required to document their charges to other departments using the
University's standard documentation requirements for approval and authorization. Service
Centers should require an approved purchase requisition before the services are
rendered. A completed copy of the purchase requisition confirming the amount to be charged
should be returned to the customer. Service Centers may adopt other documentation and
approval procedures which may be more suitable for their operations while maintaining
adequate internal controls.
Invoices prepared for external customers, as well as follow-up on accounts receivable
and the deposit of collected revenues, is the responsibility of the department.
ACCOUNTING POLICY & PROCEDURE MANUAL
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6.) Record Retention
It is the Service Center's responsibility to maintain records of the details of all
charges and to answer inquiries concerning those charges. The records of charges should be
retained for a minimum of seven years.
CASE WESTERN RESERVE UNIVERSITY
ACCOUNTING POLICY & PROCEDURE MANUAL
Exhibit A
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ACCOUNT:___________
..................................................................
SERVICE CENTER INFORMATION SHEET
..................................................................
NAME OF SERVICE CENTER:___________________________________________
PURPOSE OF SERVICE PROVIDED:______________________________________
__________________________________________________________________
__________________________________________________________________
RESPONSIBLE PERSON:______________________DEPARTMENT:______________
REQUESTOR:_______________________________EXTENSION:_______________
INTENDED METHOD OF BILLING:_______________________________________
__________________________________________________________________
ESTIMATED ANNUAL VOLUME OF SALES: $_______________________________
WILL PERSONAL OR EXTERNAL SALES BE MADE? ( )YES ( )NO
IF YES, EXPECTED EXTERNAL VOLUME: $____________________
EXPECTED TYPE OF CLIENTS (COMMERCIAL, EDUCATIONAL INSTITUTIONS,
UNIV. PERSONNEL, ETC.):_______________________________________
APPROVALS: SIGNATURE __________________________
DEPARTMENT HEAD:____________________________DATE:____________
DEAN OR VICE-PRESIDENT______________________DATE:____________
BUDGET OFFICE:______________________________DATE:____________
GRANTS AND CONTRACTS ACCOUNTING:____________DATE:____________
..................................................................
TO BE USED BY ACCOUNTING
..................................................................
SUBSIDY ACCOUNT:_________________ ACCOUNT ESTABLISHED BY:
RECEIVABLE ACCOUNT:______________ __________ __________
INITIALS DATE
SUBCODE TO CHARGE SERVICES:_______________________
..................................................................
COPIES: RESPONSIBLE PERSON BUDGET OFFICE
DEPARTMENT HEAD OFFICE OF GRANTS AND CONTRACTS
DEAN OR VICE-PRESIDENT ACCOUNTING
* PLEASE ATTACH OPERATING BUDGET AND RATE PAGE
ACCOUNTING POLICY & PROCEDURE MANUAL
Establishing Service Center Rate: An Example Exhibit B
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OPERATING COSTS
Salaries $60,000
Fringe Benefits (24%) 14,400
Supplies 2,500
Materials 200,000
Telephone 2,000
Provision for Depreciation 100,000
Facilities Expense 100,000
Consultant 61,000
Interest 1,000
Disposition of prior years
(Surplus)/ Deficit (prior year) (9,000)*
TOTAL COSTS 531,900
* Applicable only when setting rates in other than the first time.
40 hours/week x52 weeks/year = 2080 hours/person/year
Less: vacation time (80)
floating holidays (40)
University holidays (56)
estimated sick time (72)
other non-billable (40)
sub-total 1,792 billable hours/year
Times two employee 3,584 billable hours
CONSUMPTION RATE: 531,900 Total Cost = $148.41/hr
3,584 BILLABLE HOURS
UNIT COST RATE: 531,900 Total Cost = $354.60/black box
1,500 BLACK BOXES
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