University of Connecticut

1

Service CentersService Centers

University of Connecticut

2

Definition The management of service centers is governed by The management of service centers is governed by

University policy statement, University policy statement, Financial Management of Financial Management of Services CentersServices Centers, Policy CADS-3 issued June 19, 1998, , Policy CADS-3 issued June 19, 1998, effective July 1, 1998. Following policy the University has effective July 1, 1998. Following policy the University has a “Service Center and Cost Recovery Committee” a “Service Center and Cost Recovery Committee” (“SCCRC”).(“SCCRC”).

NACUBO states: “A service department provides a NACUBO states: “A service department provides a specific type of service to various institutional specific type of service to various institutional departments rather than to individuals and is supported departments rather than to individuals and is supported by internal charges. Such a service might be purchased by internal charges. Such a service might be purchased from commercial sources, but for reasons of from commercial sources, but for reasons of convenience, cost or control is often provided more convenience, cost or control is often provided more effectively from a service department of the institution.” effectively from a service department of the institution.” Service provided to individuals or the general public are Service provided to individuals or the general public are Auxiliary Services. Auxiliary Services.

University of Connecticut

3

Service centers may either be a recharge center, such as Service centers may either be a recharge center, such as document production/copy center or physical document production/copy center or physical maintenance labor charges, or a specialized service maintenance labor charges, or a specialized service facility when the services are provided by highly complex facility when the services are provided by highly complex or specialized facilities, that for instance perform or specialized facilities, that for instance perform scientific testing or analysis. scientific testing or analysis.

These services centers may provide services on an These services centers may provide services on an incidental basis to the external users.incidental basis to the external users.

Definition (continued)

University of Connecticut

4

Criteria for Determining the Need for a Service Center Does it meet the definition?Does it meet the definition?

Does a demand exist for the goods/services to be Does a demand exist for the goods/services to be provided? This demand should be by more than one provided? This demand should be by more than one department, unit or activity and should not be based on department, unit or activity and should not be based on incidental use.incidental use.

Will there be significant volume of recharging (sales), Will there be significant volume of recharging (sales), both in dollar amount and transactions?both in dollar amount and transactions?

Will the goods/services be provided on a regular basis?Will the goods/services be provided on a regular basis?

If services are provided, will they be unique or If services are provided, will they be unique or specialized?specialized?

University of Connecticut

5

Criteria for Determining the Need for a Service Center (continued)

Can the service center be self-supported and not Can the service center be self-supported and not subsidized by the institution?subsidized by the institution?

How will this activity be affected by competition with the How will this activity be affected by competition with the private sector?private sector?

Establishment of a center must be approved by the Establishment of a center must be approved by the SCCRC.SCCRC.

University of Connecticut

6

After Establishment of a Center - Determine that the following guidelines can be met: All elements of cost incurred in providing the All elements of cost incurred in providing the

goods/services will be charged to the customers.goods/services will be charged to the customers.

Costs of other activities may not be charged to the Costs of other activities may not be charged to the Service Center accounts.Service Center accounts.

Recharged amounts must be based on approved rates Recharged amounts must be based on approved rates applied to the actual quantities of goods/services applied to the actual quantities of goods/services provided.provided.

Service Centers must calculate and publish a rate Service Centers must calculate and publish a rate schedule during the annual budget process. Initial Rates schedule during the annual budget process. Initial Rates for centers must be reviewed and have the approval of for centers must be reviewed and have the approval of the SCCRC.the SCCRC.

The Cost Analysis area of Accounting can provide The Cost Analysis area of Accounting can provide

guidance in rate development. guidance in rate development.

University of Connecticut

7

Section J47 – Specialized Service FacilitiesSection J47 – Specialized Service Facilities

Charges must be established to recover no more than the Charges must be established to recover no more than the total cost of the service over a long term period.total cost of the service over a long term period.

Billing rates charged directly to users must be based on Billing rates charged directly to users must be based on the actual use of the services.the actual use of the services.

Rates must be reviewed periodically (at least biennially) Rates must be reviewed periodically (at least biennially) and adjusted if needed. Currently the University requires and adjusted if needed. Currently the University requires annual. annual.

A schedule of rates must be established which does not A schedule of rates must be established which does not discriminate between federally and non-federally discriminate between federally and non-federally supported users.supported users.

OMB Circular A-21 (Compliance)

University of Connecticut

8

Appendix A – Cost Accounting Standards and their Appendix A – Cost Accounting Standards and their application to service centers.application to service centers.

CAS 501 – Service Center costs budgeted in proposals CAS 501 – Service Center costs budgeted in proposals must be reconcilable to actual charges in the accounting must be reconcilable to actual charges in the accounting system.system.

CAS 502 – Cost must be charged consistently as direct or CAS 502 – Cost must be charged consistently as direct or indirect cost and the rate development process must be indirect cost and the rate development process must be consistently applied.consistently applied.

CAS 505 – Service centers must exclude unallowable costs CAS 505 – Service centers must exclude unallowable costs from billing rates and must identify the actual costs of from billing rates and must identify the actual costs of providing services to all users, regardless of the funding providing services to all users, regardless of the funding sources.sources.

CAS 506 – Rates should be established based on the CAS 506 – Rates should be established based on the University’s fiscal year, unless there is a legitimate University’s fiscal year, unless there is a legitimate reason for using an alternative period.reason for using an alternative period.

OMB Circular A-21 (Compliance) (continued)

University of Connecticut

9

Federal: Review Guide for Long-Form University Facilities Federal: Review Guide for Long-Form University Facilities and Administrative Cost Proposaland Administrative Cost Proposal

1. Specialized Service Centers1. Specialized Service Centers2. Special requirements for Animal Research facilities2. Special requirements for Animal Research facilities http://rates/psc.gov/lfrevugd1/pdf

A-133 (Audit) Compliance Supplement (Part 3, Compliance A-133 (Audit) Compliance Supplement (Part 3, Compliance Requirements—Internal service, central service, pension, Requirements—Internal service, central service, pension, or similar activities)or similar activities)

Other Sources of Federal Guidance