i&r training policies, procedures, & proposal preparation january, 2012
TRANSCRIPT
I&R Training
Policies, Procedures, & Proposal Preparation
I&R Training
Policies, Procedures, & Proposal Preparation
January, 2012
AgendaAgenda
1. Income & Recharge Introduction2. Functional Responsibilities3. Types of Review4. Rate Development Steps5. Managing a Recharge Center6. Proposal Preparation7. Questions and Common Issues8. References and Contact Information
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IntroductionIntroduction
University departments provide goods and services that are not “core funded”, and therefore must charge for those services
Clients may be campus departments, students, faculty, staff, and/or general community
Charges to campus departments = RECHARGE
Charges to outside groups = INCOME
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Campus ReviewCampus Review
Required by Federal and University policies to review and approve rates charged for goods and services
To insure consistent costing procedures are used throughout the campus
Insures that departments & control points actually review their self-supporting activities
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TYPE 1 RECHARGETYPE 1 RECHARGE
1. The cost charged to one department for specific goods or services by another department. Includes auxiliary and services enterprises, academic department support units, plant services
Most recharges fall into this category
Examples: copy services, use of research equipment, automobile rentals
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TYPE 2 RECHARGE
• The cost charged to self-supporting activities that are primarily funded from external income for identifiable services provided by central campus administrative offices
• Example: NSFAS, Accounting charging Housing for payroll services.
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TYPE 3 RECHARGETYPE 3 RECHARGE
The cost charged to a department for special services by a central campus administrative office, beyond normal services provided
Example: Human Resources provides a broad range of services to the campus free of charge, and also provides training classes for a fee
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DEPARMENTAL ROLESDEPARMENTAL ROLES
• Overall operation of the recharge center• Compliance with all University policies and
procedures• Reviews the budget, revenue, expenses,and
services provided on an ongoing basis• Preparation and submittal of annual rate review
package to the control point and Budget Office in a timely manner
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CONTROL POINT ROLECONTROL POINT ROLE
• Oversees and assists with the operation of recharge units
• Reviews and endorses all new rates, rate revisions and self-certification forms prior to submission to the Budget Office
• Reviews and concurs with any surplus/deficit reduction plan
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I&R COMMITTEE ROLEI&R COMMITTEE ROLE
• Oversees the Income and Recharge process
• Approves the establishment of all new recharge units
• Approves Rate Revision and On-Cycle reviews
• Reviews and approves all surplus/deficit reduction plans
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BUDGET OFFICE ROLEBUDGET OFFICE ROLE
• Provides the Chair to the Income & Recharge Committee and ongoing staff support to the committee
• Acts in an advisory capacity to recharge centers and departments
• Reviews rate proposals (approves Self-Certification Reviews
• Provides training to the campus community• Provides ongoing fiscal review of the University’s
recharge operations
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ACCOUNTING & AUDIT ROLEACCOUNTING & AUDIT ROLE
• Provides general accounting assistance to recharge units, including assignment of object codes, fund set up, accounting for inventory and depreciation & reserves
• Provides assistance on tax issues such as Unrelated Business Income Tax and sales tax
• Provides training to the campus community
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REVIEW TYPESREVIEW TYPES
After a new rate for goods or services has been established, an annual review must be submitted to the Budget Office through the control point
Self-Certification Review
Rate Revision Review
On-Cycle Review
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SELF-CERTIFICATION REVIEWSELF-CERTIFICATION REVIEW
• No new goods or services
• No change in costing methodology or business practices
• No personnel or salary changes beyond those authorized or anticipated by the University
• Review and approval delegated to the Budget Office
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RATE REVISION REVIEWRATE REVISION REVIEW
• New rates requested due to changes in costing methodology, business practices, or personnel are different from those authorized or anticipated by the University.
• Review by Income and Recharge Committee
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ON-CYCLE REVIEW
Depends on volume of unit’s recharge activity:
ON-CYCLE REVIEW
Depends on volume of unit’s recharge activity:
• Income is greater than $200K/year - a complete review every 3rd year
• Income is between $50K and $200K/year - a complete review every 5th year
• Income is less than $50K/year - no On-Cycle Review; the annual Self-Certification Review is sufficient
Reviewed by Income and Recharge Committee
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RULES & CRITERIARULES & CRITERIA
• Funding for the service is not part of the department permanent budget
• A specifically identifiable good or service is provided
• Services are unique or specialized• Services are provided to multiple
departments on a regular, ongoing basis• Separate costs and budgets must be clearly
defined for the activity
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RULES & CRITERIARULES & CRITERIA
• Services provided should not be readily available from outside sources. If they are, there must be overriding economic or ethical issues requiring the University to provide these services.
• All campus users are charged the same rate for the same services provided
• Recharge centers must only charge their published, approved rates
• Units should operate on a break-even basis
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RULES & CRITERIARULES & CRITERIA
• Services can be provided to non-campus, non-affiliated entities only if they are unique and support the campus’s academic mission. Rates charged to these entities should be fully costed and include the campus’s indirect cost surcharge.
• All rates must be reviewed annually. Review may be in the form of Self-Certification, On-Cycle Review, or Rate Revision Review
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RATE CRITERIARATE CRITERIA
• Must cover full cost of the operation. May also include indirect costs.
• Must be reasonable• Should be developed to break even• Must be consistently charged• May be subsidized• “Deterrent Fees” - late fees, rush fees - may be
charged with proper justification
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DIRECT COSTSDIRECT COSTS
• Include all direct costs - all allowable direct costs of providing the product or service should be included in the recharge pool
• Costs are identifiable - they can be identified specifically with a recharge product or service
• Costs need to be reasonable - is the cost generally recognized as necessary for the operation?
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DIRECT COSTSDIRECT COSTS
• Costs need to be treated consistently
• Costs are reasonably allocable - must be able to assign a cost, or a group of costs, to the recharge pool in reasonable and realistic proportion that reflects the benefit provided
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ALLOWABLE COSTSALLOWABLE COSTS
Allowable costs include:
• Salaries, wages and fringe benefits• Supplies and services• Maintenance and repair of equipment• Equipment depreciation• Administration costs of the recharge unit• Lease costs of non-University owned space• Prior year operating surplus/deficit that occurred
through the normal course of business
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UNALLOWABLE COSTSUNALLOWABLE COSTS
A-21 unallowable costs (e.g., entertainment, memberships, donations & contributions, advertising, bank card fees, bad debts, legal fees, fines & penalties)
• Costs of capitalized improvements• Exceptional charges that did not occur
through the normal course of business (e.g., costs related to non-recover of recharge income due to department not billing recharge customers in accordance with University billing procedures)
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EQUIPMENTEQUIPMENT
Inventorial equipment is a stand-alone item with a useful life greater than one year and a value greater than $5,000
Federal guidelines do not allow the purchase cost of equipment to be charged directly to the recharge activity. Equipment must be funded from some other source (e.g., equipment reserves, general funds, gift funds, or other unrestricted fund sources)
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EQUIPMENT DEPRECIATIONEQUIPMENT DEPRECIATION
• Equipment should be depreciated on a straight-line basis
• Useful life tables can be found at: http://eulid.ucop.edu
• Depreciation must begin in fiscal year that equipment is purchased
• See Dale O’Donnell in Accounting if equipment will be depreciated
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EQUIPMENT DEPRECIATIONEQUIPMENT DEPRECIATION
Depreciation expense is included as a cost in the rate development except when:
• Equipment is funded by the federal government
• Equipment is identified as cost sharing to a federal research project
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RATE SUBSIDIESRATE SUBSIDIES
• Subsidies fund a portion of the recharge unit’s total costs, which results in lower rates
• Multiple subsidies are allowed• Non-campus users should be charged
unsubsidized rates• Subsidies may be used to:
• Offset expenses of the recharge activity• Pay for specifically identified purchases• Reduce the price for all University users or specific
products or services
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ALLOCATING JOINT COSTSALLOCATING JOINT COSTS
• Departments that have more than one service unit may have joint costs that apply to some or all of the units
• The joint costs should be allocated to the units on a basis that reflects the benefit to the unit
• Common bases for allocating joint costs:• FTE• Chargeable labor hours• Hours of machine usage• Assignable square footage
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RESERVESRESERVES
• Make appointment to see Dale O’Donnell in Accounting - [email protected]
• Rates that include equipment should have a depreciation reserve
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MANAGING RECHARGE CENTERSMANAGING RECHARGE CENTERS
Recharge Center BudgetsCustomer Relations and ConsultationsBillingDeficits and SurplusesReservesEquipment Purchases
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RECHARGE CENTER BUDGETSRECHARGE CENTER BUDGETS
• All recharge departments must have a permanent budget that reflects projected revenue and expense
• Permanent budgets must be revised at the end of the fiscal year to account for the anticipated changes and be reflected in the July 1 Adjusted Budget
• Work with Arliene Shelor in the Budget Office to establish or update the permanent budget
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CONSULTATION WITH USERSCONSULTATION WITH USERS
• Recharge providers must notify customers as early as possible of proposed rate changes(This should happen when the Rate Revision Review is submitted)
• Departments should have in place a process to determine customer satisfaction, which should be documented in the rate proposal package
• Approved rates for goods and services should be posted and readily available to potential and current users (e.g., on a web site, in the department office)
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BILLINGBILLING
• Recharge unit may not bill in advance of providing goods or services
• Departments need to bill their customers in a timely manner:
• No longer than 45 days after goods or services have been delivered, or
• No longer than 45 days after recharge center has been billed by third party providing goods or services
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BILLINGBILLING
• Recharge unit must use correct account/fund/sub as provided by customer
• External users must be billed through BARC
• May only bill customers using approved rates
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DEFICITS & SURPLUSESDEFICITS & SURPLUSES
• Recharge center should operate on a break-even basis
Surplus: general fund balance greater than 30 days operating expense
Deficit: general fund balance deficient by greater than 30 days operating expense
• A unit that is out of tolerance must develop a “recovery plan” to bring it back into range within 3 months of being notified by Accounting Office or Budget Office
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DEFICITS & SURPLUSESDEFICITS & SURPLUSES
• Recovery plan must be put in place to eliminate surplus or deficit within three years
• Plan needs to be reviewed and endorsed by Control Point before it is forwarded to Budget Office
• If plan requires a rate change, a Rate Revision Review must be completed
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PROPOSAL PREPARATIONPROPOSAL PREPARATION
1. Identify lines of business
2. Pool costs along lines of business
3. Identify means of distributing costs
4. Estimate usage
5. Develop rates
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GENERAL RATE CALCULATION GENERAL RATE CALCULATION
• In its most simple form, a recharge rate is calculated by dividing the total cost of providing the goods or services by the total projected activity
Total Budgeted ExpenseRate = (Plus Prior Year Deficit, or Minus Prior Year Surplus)
Total Projected Level of Activity for the Budget Period
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RATE CALCULATIONSRATE CALCULATIONS
• Productive Time Calculation• Recharge Personnel Hourly Rate Calculations• Sample Rate Calculation - Labor• Sample Rate Calculation - Mark-Up• Sample Rate Calculation - Production
• Calculation and Revenue & Expenses Summary
• Sample Rate Calculation - Rental• Calculation and Revenue & Expenses Summary
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THE RATE PACKAGETHE RATE PACKAGE
• Transmittal Memo• Rate Proposal Cover Sheet• A - Description of Goods and Services• B - Customer Information• C - Summary of Individual Rates• D - Proposed Budget• E - Actual Expense and Revenue Summary• F - Equipment Depreciation
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QUESTIONSQUESTIONS
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REFERENCESREFERENCES
• University of California Business and Finance Bulletin A-47, University Direct Costing Policy
• University of California Business and Finance Bulletin A-56, Academic Support Unit Costing and Billing Guidelines
• University of California Business and Finance Bulletin A-59, Costing and Working Capital for Auxiliary and Service Enterprises
• OMB Circular A-21, Cost Principles of Educational Institutions• July 14, 1993 letter from University Controller Joseph A.
Pastrone to Administrative Vice Chancellors regarding “New Recharges to Federal Grants and Contracts”
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CAMPUS CONTACTSCAMPUS CONTACTS
BUDGET OFFICE
Todd Lee X2169 [email protected]
Arliene Shelor X4052 [email protected]
ACCOUNTING OFFICE
Jim Corkill X5882 [email protected]
Dale O’Donnell X2998 [email protected]
AUDIT SERVICES
Wanda Lynn Riley X2829 [email protected]
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