University Business Policies and Procedures Manual

2440
SERVICE CENTERS
Effective Date: July 12, 2000
Subject to Change Without Notice

1. General

As an extension of its educational service mission the University has various service centers that enhance the University's instructional and research mission. Although these activities are organized as separate service centers, they are an integral part of the University and must comply with all University policies. University service centers and other operations that regularly sell goods or services to University departments or activities must also follow cost accounting practices that comply with federal accounting requirements. This results from the fact that service center activities charge both direct and, if appropriate, indirect costs to federally sponsored grants and contracts. Federal accounting requirements are discussed in Office of Management and Budget (OMB) Circular A-21, "Cost Principals for Colleges and Universities" and "Cost Accounting Standards" Policy 2400, UBP.

A critical component of the federal accounting requirements is that the rates service centers charge must be carefully developed to ensure that they do not include costs that have been charged to a contract or grant either as a direct charge or through facilities and administrative cost pools used to determine the University's facilities and administrative cost rate. For more information refer to "Recovery of Facilities and Administration Costs" Policy 2425, UBP. For this reason service center rates must include a justification showing how the rate was determined and be approved by the Controller's office prior to use.

This policy describes procedures for the establishment of and financial administration for service centers which ensure consistent operational practices among various units and compliance with federal regulations.

2. Service Centers

A service center is an organizational unit providing a specific type of good or service (including facility usage) to University departments rather than to the general public. The service center is supported by interdepartmental charges to the user department's operating account. In order to qualify as a service center, the unit:

• is established primarily to provide goods or services to University departments, sponsored programs, and activities (including the department, program, or activity overseeing the center);
• operates as a discrete entity having control of revenues and expenses;
• is an ongoing activity; and
• charges all internal users equally for goods or services at a rate calculated to recover their costs over a fixed period of time.

This policy applies specifically to service centers and does not apply to:

2.1. Auxiliary Enterprises

These activities directly or indirectly provide services to students, faculty, or staff and charge a fee related to but not necessarily equal to the cost of services.

2.2. Units Reallocating Direct Costs

Units that reallocate or transfer direct costs at cost are not service centers.

2.3. Activities Generating Program Income

Program income is revenue earned by activities for which part or all of the cost is borne by a grant or contract or is counted as a direct cost toward meeting a cost-share or matching requirement. Program income is not derived from service center sales. Principal investigators are responsible for identification, use, and disposition of program income.

3. Responsibilities

Generally the school and/or department administrative offices are responsible for the day-to-day operations of departmental service centers which must comply with all University policies including accounting, graphic standards, payroll, and personnel policies. Specific responsibilities are detailed below.

3.1. Service Center Manager

The service center manager must:

• prepare and submit an annual budget with rate justifications to the cognizant director, dean, or vice president;
• bill in a timely manner and ensure that all billings are adequately documented;
• use the approved rate schedule for all service center billings;
• operate the service center at break-even and in accordance with the center's budget; and
• keep appropriate records for review and audit by internal and external auditors.

3.2. Directors, Deans, and Vice Presidents

Directors, deans, and vice presidents are responsible for the administrative and financial operation of service centers in their school, college, division, or unit. This includes specific responsibility to:

• approve all information necessary to establish a service center;
• approve budget and annual rate proposals; and
• fund audit disallowances and annual losses exceeding five percent (5%).

3.3. Controller's Office

The Controller's Office is responsible for:

• establishing and closing all service center accounts;
• processing accounting transactions;
• reviewing and approving service center rates;
• monitoring service center financial operations; and
• providing billing and accounting assistance for service centers.

4. Costs

Because service center costs are used to determine the rates charged, service center accounts should contain only federally-defined allowable and allocable costs. These costs may include, but are not limited to, direct costs such as salaries, benefits, supplies, maintenance, and travel, and if appropriate, indirect costs. Only costs directly related to the operation of the service center can be used to calculate rates.

A service center may incur costs that are allowable by University policy ("Allowable and Unallowable Expenditures" Policy 4000, UBP) but may be deemed unallowable by federal regulations. "Accounting for Federally-Defined Allowable and Unallowable Costs" Policy 2410, UBP defines allowable and unallowable costs and provides accounting procedures for any federally-defined unallowable costs.

 5. Billing Rates

Billing rates have a large impact on federally-funded contracts and grants and are subject to heightened scrutiny by federal auditors. Therefore, billing rates must be:

• substantiated with allowable costs and usage calculation;
• reviewed and, if necessary, adjusted at least annually;
• stated in measurable units, i.e. hours of service, number of items bought or weight; and
• applied to all internal users on the same basis, however a higher rate or rates may be charged for sales to external entities (non UNM accounts).

Billing rates should be established at levels sufficient to recover all allowable costs over a defined break-even period. Billing rates cannot include the full cost of capitalizable equipment, building, and improvements but should include the full allowable depreciation charge on such items. While full costing is desirable, it is not always feasible to full cost a service center. There are times when indirect costs, such as facility costs, cannot be separately identified to the service center. When this occurs, only direct costs will be recovered through established rates.

6. Accounting and Budgeting

As self-funded business operations, service centers are budgeted and accounted for separately from other departmental activities. The costs of operating a service center shall not be commingled with the costs of other operations. Annual service center budgets must reflect expected revenue, funding sources, and expenses. Service Center rates must be reviewed at least annually and adjusted if necessary to eliminate any surplus in excess of allowable reserves or deficits. Since service centers operate on a break-even basis, profits and losses in excess of five percent (5%) should be reviewed to determine if rates need to be adjusted for the following year.

7. Graphic Standards and Marketing

Service Centers are expected to follow the University's graphic standards described in "University External Graphic Identification Standards" Policy 1010, UBP. The centers must use the University logo on printed and other materials and are prohibited from using separately designed logos.

Comments may be sent to UBPPM@UNM.edu
http://www.unm.edu/~ubppm