1. SUMMARY OF ADMINISTRATIVE PROCEDURE

    1. Purpose: This policy outlines the process involved in developing Service Center billing rates within USNH for internal customers (including federal grants).

      The rates charged to "external" customers (non-USNH departments) may exceed the cost-based rate. The use of such a rate requires Controller's Office approval. If such approval is received, revenue generated through the higher rate must be captured separately.

    2. Definition of a Service Center Billing Rate:
      1. The internal billing rate is the dollar amount charged for each unit of goods or services provided and used for billing purposes, based on annual costs.
      2. The rate must be constructed to neither overcharge nor undercharge internal customers. The goal is to break even on a cost basis. Campus CFO approval is required to subsidize a Service Center by charging less than cost.

      Example: Estimated Total Annual Costs / Total Estimated Billing Units = Billing Rate per Unit

    3. Why is a Service Center billing rate policy necessary? It is good business practice to review rates and costs on a regular basis. USNH must use consistent and equitable cost accounting practices to ensure compliance with federal regulations and cost accounting standards. These federal regulations are outlined below.
    4. Responsibility: Departments are responsible for seeking annual approval of Service Center billing rates from the campus CFO upon initial establishment of the Service Center, and each year thereafter. In addition, departments must maintain documentation of this approval and detailed supporting calculations for 3 years after the close of the affected fiscal year.
  2. GENERAL GUIDELINES

    Federal Regulations Regarding Service Center Rates: All Service Centers are subject to the cost principles and cost accounting standards outlined in OMB Circular A-21 Cost Principles for Educational Institutions. In general, rates must be based on actual costs, applied consistently, and based on the actual use of the services.

    1. Service Centers should recover costs over a reasonable period. A reasonable period is defined as one fiscal year.
    2. The same rate schedule should be used for all internal users. This rate schedule must not discriminate against federally funded accounts for the benefit of other internal users.
    3. Rates must be reviewed periodically for consistency with long-term costs by department staff administering the Service Center.
    4. Service Centers must exclude federally unallowable costs from their billing rates and the rates must include the actual costs of performing the service to all users, see Procedure 02-060, Unallowable Costs, for more information.
  3. DETAILED OPERATING PROCEDURES FOR SERVICE CENTER RATE DEVELOPMENT

    Instructions for Preparation of a Service Center Rate

    1. Identify all services provided. A separate rate should be calculated for each category of service, when there are different costs or user populations receiving services.
    2. Determine direct costs of Service Center operations that are specifically identifiable with relative ease and a high degree of accuracy, such as:
      1. Salaries and benefits of staff directly providing the service
      2. Materials costs
      3. Contracted services
      4. Equipment lease or rental
      5. Repairs and machine supplies
      6. Other directly related expenses
    3. Identify Service Center indirect costs incurred for multiple goods or services within the Service Center. These costs need to be included in the rate, but may not include costs that are part of the campus indirect cost rate.
      1. Salaries and benefits of administrative staff who support the Service Center (such as directors and accounting staff)
      2. Supplies
      3. Equipment
        1. Equipment includes items with a unit cost of $1,000 or more and a useful life of 2 years or more.
        2. Equipment bought with federal funds must be excluded from federal accounts rate.
        3. Allowable costs should include only the current year's depreciation, not the current year's purchases.
      4. Debt Service
        1. External interest on long-term debt or capital leases may be charged with prior approval from the campus CFO, USNH treasurer, and the cognizant federal audit agency.
        2. Principal payments should not be included in billing rates as they are equity purchases not a current year expense.
        3. Interest on interfund borrowing is not an allowable cost.
    4. Identify campus-wide indirect costs to be included in billing rates (if any). Indirect costs are the facilities and administrative infrastructure costs of USNH. These costs are generally excluded from Service Center rates. Please consult with the campus CFO before including such costs.
    5. Develop a method to allocate Service Center indirect costs to each service.
      1. Allocations should be based on a causal and beneficial relationship.
        For example:
        1. Percentage of Effort
        2. Usage (time)
        3. Costs
        4. Space - square footage
    6. Accumulate or estimate usage for each service (such as number of units) to establish the distribution base. All usage must be included, regardless of whether discounts or free service is provided.
    7. Calculate cost-based rate for each service.
      1. Divide the total annual operating cost by the total estimated billing units to determine the billing rate per unit.
        For example:
        1. For a Service Center that provides photocopies, the billing unit would be the number of copies.
        2. For a center that provides services, the billing unit would generally be the number of hours of service.
    8. Determine the rate that will actually be charged.
      1. Federal users must be charged no more than the cost-based rate. Excess revenues are allowed on non-federal external users only. A balance may be developed. The balance must be segregated, to allow for the calculation of a true unit price.
      2. Discounts provided to non-federal users must not be subsidized by federal users. The subsidy must be quantified and excluded from future period billing rate calculations.
      3. If market prices are used, they should be compared to actual costs to ensure rates do not result in overcharges to federal users.
    9. Obtain approval of the billing rate from the campus CFO.
    10. Review Rates annually and incorporate prior year deficit or surplus.
      1. Revenues that exceed the actual cost of service can not be used to subsidize other services of the Service Center, unless user mix is similar.
      2. Billings should be calculated for users that are not charged cost-based rates.
      3. Any surplus should not exceed 60 days of working capital, per A-21.
      4. Surpluses or deficits that exceed the established threshold should be used to adjust future billing rates or be credited back to users. This effort can exclude the balance created on external customers, so long as these surpluses can be documented.
      5. Obtain annual approval of the billing rate from the campus CFO.
    11. Document activities and maintain records for 3 years to support expenditures, rate calculation, published rates, usage statistics and billings, per OMB Circular A-21.