A service center is an operating unit within the university providing specific technical or administrative goods or services in direct support of the academic or research activities of the university. A service center recovers the cost of its operations through charges to users. Examples include but are not limited to lab analysis services, print and mail services, instrumentation shops and animal care services.
This policy outlines requirements for the financial management of service centers to support:
The service center billing rate is the cost per unit of measure (UOM) used to recover the costs of the service center. New service center billing rates and changes to existing rates are calculated with guidance from Financial Management and approved by:
Service center billing rates must be calculated and reviewed based on the university’s fiscal year. Rates must be reviewed and adjusted at least biennially.
All service centers must comply with the Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 C.F.R. 200) (Uniform Guidance). Key requirements of the Uniform Guidance include:
a) The costs of services provided by highly complex or specialized facilities operated by the non-federal entity (e.g., computing facilities, wind tunnels, reactors) are allowable, provided the charges for the services meet the conditions of either (b) or (c) below, and, in addition, take into account any items of income or federal financing that qualify as applicable credits under §200.406.
b) The costs of such services, when material, must be charged directly to applicable awards based on actual usage of the services based on a schedule of rates or established methodology that:
c) Where the costs incurred for a service are not material, they may be allocated as indirect (F&A) costs.
d) Under some extraordinary circumstances, where it is in the best interest of the federal government and the non-federal entity to establish alternative costing arrangements, such arrangements may be worked out with the federal cognizant agency for indirect costs.
With guidance from Financial Management, service centers must first calculate a service center base rate for each service based on allowable rate components.
Service Center Base Rate = Budgeted Costs / Budgeted Unit of Measure (UOM)
Budgeted costs are based on prior year costs or an estimate of the upcoming year’s costs. New service center billing rates must be based on a reasonable estimate of the costs to provide the services for the year and the projected volume for the year.
UOM is the volume of work expected to be performed (e.g., labor hours, machine hours, CPU time, or other reasonable measurement). This volume of work must be based on the total annual UOMs, regardless of whether the user is charged. This is necessary to avoid having some users pay higher rates to compensate for reduced rates charged to other users.
Once the service center base rate is calculated, service centers may set variable billing rates, based on the customer types.
Internal Rate = (Cost - Subsidies):
Internal Rate + GUSF = (Internal Rate + GUSF):
External Rate = (Cost + GUSF + Markup):
Cost | Description |
---|---|
Direct Labor | The salaries and wages of all personnel directly related to a service center activity (e.g., lab technicians, machine operators) must be included in the rate calculation and charged to the service center operating account. If an individual works on more than one activity, the costs associated with that individual must be allocated to the activities based on the proportional benefit with the total benefit not exceeding 100 percent of an individual's time. This proportion may be determined by an effort or time study or based on a good faith estimate by service center management with an annual review for reasonableness |
Administrative Staff | The salaries and wages of administrative staff in direct support or Direct Labor. The salaries and wages of all personnel directly related to a service center activity (e.g., lab technicians, machine operators) must be included in the rate calculation and charged to the service center operating account. If an individual works on more than one activity, the costs associated with that individual must be allocated to the activities based on the proportional benefit with the total benefit not exceeding 100 percent of an individual's time. This proportion may be determined by an effort or time study or based on a good faith estimate by service center management with an annual review for reasonableness. |
Fringe Benefits | Fringe benefits related to State IFR, RF, or UBF salaries charged to the service center operating account must be included in the service center billing rate calculation. Because the university does not pay fringe benefits for salaries funded by state operating accounts, fringe benefits for these salaries may not be included in the service center billing rate calculation. |
Capitalized Equipment | Equipment With a Purchase Price Equal To or Greater Than $5,000: Equipment with a purchase price equal to or greater than $5,000 cannot be entirely included as a cost in the year purchased when calculating service center billing rates. The cost of the equipment must be included in the service center billing rate as depreciation, using the straight-line method. Straight-line depreciation is calculated by dividing the original purchase cost of the equipment by its useful life. This ensures that users pay only for equipment costs associated with the usage in a given year. |
Non Capitalized Equipment | Equipment With a Purchase Price Less Than $5,000: Equipment with a purchase price of less than $5,000 is treated as an equipment expense. Equipment Purchase Price of $1 to $999: Expense the total cost in the year purchased. Equipment Purchase Price of $1,000 to $4,999: Expense the total cost over a three-year period or useful life. |
Maintenance Costs | The cost of service contracts or repairs costs needed to maintain service center equipment must be included in the rate calculation and charged to the service center operating account. |
Materials and Supplies | The cost of materials and supplies needed to operate a service center must be included in the rate calculation and charged to the service center operating account. If a service center sells products from an inventory or maintains an inventory of parts and supplies used in providing its services, inventory records must be maintained. |
Other Expenses | Other expenses may include, but are not limited to:
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Additional Expenses for Students Paying with Non-University Funds or External Customers |
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Additional Expenses for External Customers Only |
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The OMB Uniform Guidance includes a list of considerations for selected items of cost. The list is not all-inclusive and failure to mention a particular item of cost is not intended to imply that it is either allowable or unallowable. Unallowable costs must be excluded from service center billing rates.
The following list contains some of the costs that have been specifically identified in OMB’s Uniform Guidance as unallowable:
OMB Section | Description |
---|---|
§200.421 | Advertising costs that are not for (1) the recruitment of personnel required by the award; (2) the procurement of goods and services required to perform the award; and (3) the disposal of scrap or surplus materials acquired in the performance of the award. |
§200.421 | Advertising and public relations costs (1) of meetings, conventions, convocations, or other events related to other activities of the University; (2) of promotional items and memorabilia; and (3) designed solely to promote the University. |
§200.423 | Alcoholic beverages. |
§200.424 | Alumni activities. |
§200.426 | Bad debts. |
§200.430 | Compensation for personal services (1) that is not reasonable for the services rendered and (2) does not conform to the established written policy of the university, consistently applied to all activities. |
§200.431 | Compensation for automobile costs that relate to personal use by employees (including transportation to and from work), regardless of whether the cost is reported as taxable income to the employees. |
§200.432 | Conferences that (1) do not have the primary purpose of disseminating technical information beyond the University and (2) are not reasonable for successful performance of the award. Conferences can also mean meetings, retreats, seminars, symposiums, and workshops. |
§200.434 | Contributions and donations made by the university to other entities, including cash, property, and services. |
§200.438 | Entertainment costs, including amusement, diversion, and social activities and any associated costs that don’t have a programmatic purpose or are not authorized by the awarding agency. |
§200.445 | Goods or services for personal use by employees. |
§200.454 | Membership in any country club or social or dining club or organization, as well as membership in any organization whose primary purpose is lobbying. |
§200.459 | Professional and consultant services rendered by persons who are officers of the university. |
§200.466 | Scholarships and student aid costs, in lieu of wages, that (1) are not for necessary activities of the award; (2) are not in accordance with established policies of the university; (3) are not consistently provided in a like manner to students in return for similar work conducted in other university activities; (4) are not for students enrolled in an advanced degree program that is related to the award; (5) are not reasonable compensation for the work performed; (6) are not conditioned explicitly upon performance of the necessary work; and (7) occur when it is not the university’s practice to similarly compensate students under awards as well as other activities. |
§200.467 | Selling and marketing costs of any products and services of the university, without prior approval of the awarding agency. |
§200.469 | Student activity costs incurred for intramural activities, student publications, and student clubs, unless specifically provided for in the award. |
§200.474 | Travel costs for lodging and subsistence (1) that are not reasonable and consistent with the university’s established travel policy and (2) are for dependents, unless the travel is for a duration of six months or more and have been approved by the awarding agency. |
§200.474 | Travel costs for commercial air travel that are in excess of the basic least expensive unrestricted class offered, except when such accommodations would require circuitous routing, travel during unreasonable hours, excessively prolonged travel, additional costs that would offset savings, or are not reasonably adequate for the traveler’s medical needs. |
Cost | Description |
---|---|
Equipment Purchased With Federal Funds | Depreciation of equipment purchased by federally sponsored programs, whether or not title has reverted to the university, cannot be included in the service center billing rates. Where the university has agreed to cost-share a piece of equipment on a federal award, depreciation of the university-funded portion is allowable in the service center billing rates. |
Equipment Included In the University’s F&A Rate | The federal government cannot be charged for the depreciation of a piece of equipment both through a service center billing rate and through the university's indirect (F&A) rate. Financial Management will review equipment items included in the service center billing rate to confirm that the equipment is excluded from the university’s indirect (F&A) rate charged to federally sponsored programs. |
Task | Title or Department Responsible |
---|---|
Provide Financial Management with all necessary information to calculate service center rates | Service Center Managers |
Review actual costs and billing rates for reasonableness at least annually and adjust when necessary. | Service Center Managers |
Submit documentation supporting new billing rate calculations and adjustments to existing rates to Financial Management for review. | Service Center Managers |
Provide guidance in the calculation of service center billing rates. | Financial Management |
Provide guidance in the calculation of project break-even (pro forma) and perform biennial reviews. | Financial Management |
Review and recommend approval of new rates and changes to existing rates for service centers. | Financial Management |
Perform periodic reviews of service center financial management to ensure consistency with this policy and federal guidelines. | Financial Management |
Review all equipment included in the service center billing rate to ensure that the equipment is excluded from the university’s indirect (F&A) cost rate charged to federally sponsored projects. | Financial Management |
Review and approve service center billing rates.
| Unit Business Officer, Controller, Provost Designee |
Service centers must develop billing rates so that revenues offset costs over a reasonable period of time.
With proper approval, operations may be subsidized, if the center is meeting its research or educational mission to serve the University. When billing rates are lower than cost, the resulting deficit cannot be carried forward as an adjustment to future billing rates. Amounts charged to external users in excess of the internal service center billing rate must be excluded when calculating the service center surplus or deficit.
Internal university customers must be charged at cost for services provided.
Service centers must bill all customers for all services provided. With proper approval, the service center may choose to provide a service to an internal group of customers at no charge or at a lower rate than other customers, however, the service center billing rate must be calculated for all internal customers based on total service center expenses and total units of output. Variable rates must be based on clear and identifiable criteria.
Services centers are permitted to charge external customers a rate higher than the rate charged to internal customers. Service centers are required to track revenues and costs associated with external customers separately to avoid the perception of overcharging.
Rates charged to external customers may include:
External rates cannot be significantly different than the prevailing rate for identical services provided by commercial organizations in the area.
Revenue from external customers may have Unrelated Business Income Tax (UBIT) implications.
During the rate development process, Financial Management will provide an annualized break-even pro-forma and will assist with reviewing the break-even analysis annually.
Task | Title or Department Responsible |
---|---|
Review and approve justification for subsidies. | Unit Business Officer |
Service centers must establish a separate account(s) to record only service center revenue and expenditures to provide transparency and an audit trail for tracking and performance. All service center accounts must roll up to a service center entity.
An Income Fund Reimbursable (IFR) account(s) should be established to record service center activity. A Research Foundation (RF) service and facility account, and/or University at Buffalo Foundation (UBF) service account may be established to record service center activity with prior approval from Financial Management and the University Controller.
Funds recovered by depreciation included in the service center billing rate must be set aside in a separate account as an equipment replacement reserve to fund the purchase of new equipment.
At a minimum, service centers must have at least one account for tracking revenue and expenditures and that account must be assigned to the service center’s entity. If a service center has funding from multiple funding sources (i.e., payroll in state operating; revenue and expenditures in state IFR; payroll or endowment funding in UBF), all accounts related to the service center entity must be assigned to the service center entity.
Financial Management recommends creating a series of sub-accounts (IFR) or tasks (RF) to track revenues and expenditures. This will help centers when they are reviewing their rates.
Service centers may choose to create one sub-account or task for each instrument or service provided. The benefit of this approach is that centers can quickly identify the instruments or services that are generating a margin, breaking even, or need to be subsidized. Financial Management can also quickly run reporting on the expenses that are related to each instrument or service when helping the center calculate updated billing rates.
Service centers may choose to deposit the revenue directly into each of the sub-accounts or tasks, or they may choose to deposit all revenue into one sub-account or task and then reconcile the accounts regularly. The benefit of using one sub-account or task for revenue centers can provide one payment link to external customers and can also easily reconcile when payments are received.
Centers that receive funding to subsidize operations should create a sub-account or task for that funding.
Base Entity | UB Entity Number | Service Center Account Number | Service Center Account Name/Purpose |
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Pharmaceutical Sciences Instrumentation Facility for Liquid Chromatography Mass Spectrometer (LCMS) | 1138 | 1111111-1-11111 | Revenue & Expenses for Service/Instrument A |
1111111-2-11111 | Revenue & Expenses for Service/Instrument B | ||
1111111-3-11111 | Revenue & Expenses for Service/Instrument C | ||
1111111-4-11111 | Revenue & Expenses for Service/Instrument D | ||
1111111-5-11111 | Revenue & Expenses for Service/Instrument E | ||
1111111-6-11111 | Funding for Subsidy |
If a center has multiple funding sources, they may elect to create a series of accounts based on the expenditure type and how it is funded.
Base Entity | UB Entity Number | Service Center Account Number | Service Center Account Name/Purpose |
---|---|---|---|
Behling Simulation Center and Clinical Competency Center | 2910 | IFR: 90000000000 | Main Account - No Activity |
IFR: 90000000100 | Revenue & Expenses for Service/Instrument A | ||
IFR: 90000000200 | Revenue & Expenses for Service/Instrument B | ||
IFR: 90000000300 | Revenue & Expenses for Service/Instrument C | ||
IFR: 90000000400 | Revenue & Expenses for Service/Instrument D | ||
IFR: 90000000500 | Revenue & Expenses for Service/Instrument E | ||
IFR: 90000009800 | Revenue and Expenses for External Revenue | ||
State Operating: 80000000000 | PSR for Staff on State Operating Lines | ||
UBF: 0-00000 | Endowment |
Funds recovered by depreciation included in the service center billing rate must be set aside in a separate account as an equipment replacement reserve to fund the purchase of new equipment. At the request of the service center manager, Financial Management will establish an account to accumulate depreciation dollars. Centers may choose to create a completely separate account number or for the Research Foundation, they may choose to create a separate project or task under the center’s main award.
Base Entity | UB Entity Number | Service Center Account Number | Service Center Account Name/Purpose |
---|---|---|---|
Center for Computational Research | 1091 | 1111111-1-11111 | CCR Fees |
2222222-1-11111 | CCR Reserves |
Task | Title or Department Responsible |
---|---|
Request separate accounts in the university's accounting systems to record service center revenues, expenditures and equipment replacement reserves. | Service Center Managers |
Provide guidance on establishing and reviewing accounts. | Unit Business Officers |
Service centers that provide services to external customers must establish Service Center Agreements. A university member may not sign or otherwise execute a procurement contract binding the university unless they are delegated a signature authority in accordance with the Approval Authority Policy. Refer to the Service Center Procedures to request a contract.
Service Centers approved to collect funds through State Income Fund Reimbursable (IFR) Accounts can request Service Center Agreements via ShopBlue.
Service Centers approved to collect funds through Research Foundation Service and Facility Accounts can request Service Center Agreements via Click.
No member of the university may sign or otherwise execute a procurement contract binding the university unless they are a delegated signature authority.
Task | Title or Department Responsible |
---|---|
Work with the assigned party from Shopblue or Click to establish Services Center Agreements with external customers. | Service Center Managers. |
Prepare and sign agreements. | Assigned party from ShopBlue or Click. No member of the university may sign or otherwise execute a procurement contract that binds the university unless he or she has been delegated signature authority. |
Billing must be based upon measured and documented utilization using approved billings rates and processed on a timely basis. An invoice must not be issued until the service has been rendered or the materials provided (pre-billing is not allowed).
Invoicing and accounts receivable tracking must be managed through university-approved systems.
Revenue collection must be processed through a university-approved method.
Billing must be based upon measured and documented utilization using approved billings rates and processed on a timely basis.
Depending on the service center’s funding source and the customer’s funding source, there are different processes for invoicing and collecting payments.
Service Center Funding Source | Customer Funding Source | Invoice Template | Customer Payment Method |
---|---|---|---|
State - Income Fund Reimbursable Account (IFR) | State | Interdepartmental Invoice (IDI) | Signed IDI Form - Recharge Codes on both sides |
RF | Interdepartmental Invoice (IDI) | Signed IDI Form – RF Expense Code on RF side, Source Code 3311 on State IFR side | |
UBF | Interdepartmental Invoice (IDI) | ||
External | Invoice | ||
Research Foundation - Non-Sponsored Service and Facilities Account (RF) | State | Invoice | ShopBlue (RF as Vendor) |
RF | Interdepartmental Invoice (IDI) | Signed IDI Form - Recharge Codes on both sides | |
UBF | Interdepartmental Invoice (IDI) | ||
External | Invoice | ||
University at Buffalo Foundation Account | State | Invoice | ShopBlue (UBF as vendor) |
RF | Invoice | ShopBlue (UBF as vendor) | |
UBF | Interdepartmental Invoice (IDI) | ||
External | Invoice |
The university is currently implementing a newly procured system: BLUE SERVICES, powered by iLabs. This tool will revolutionize how our service center managers and staff handle equipment reservations, billing, reconciliation, inventory management and more.
Task | Title or Department Responsible |
---|---|
Prepare and issue invoices for actual services provided. Charging users in advance is not allowable per federal regulations. | Service Center Managers |
Provide guidance on procedures for billing and collection revenue. | Unit Business Officers |
Service centers receiving payments must ensure that appropriate segregation of duties is maintained to safeguard funds and the university’s reputation as required by the Safeguarding Cash and Cash Equivalents Policy.
When staffing resources make segregation of duties difficult, compensating controls must be implemented to provide the appropriate checks and balances to detect errors, deter fraud, and prevent the concealment of irregularities.
Service centers must have standard operating procedures on file.
Service centers must have Standard Operating Procedures on file, outlining who is responsible for each task in the center. Financial Management can assist centers with templates that outline these procedures.
Task | Title or Department Responsible |
---|---|
Develop standard operating procedures for the service center, including segregation of duties and compensating controls, as needed. | Service Center Managers |
Provide guidance on establishing standard operating procedures, segregation of duties, and compensating controls. | Unit Business Officers |
The service center manager must maintain rate development documentation. Documentation includes the actual costs of providing the service, units of service provided, billings, collections, and the annual surplus or deficit.
In accordance with the Uniform Guidance, original rate development documents must be retained for three years from the end of the fiscal year covered by the calculations. These documents are subject to external audit (e.g., federal, state, Research Foundation and other sponsors) and internal review.
Service center managers should work with their departments to store documentation.
Task | Title or Department Responsible |
---|---|
Maintain records to document the actual costs of providing the service, units of service provided, revenues, billings, collections, and the annual surplus or deficit. | Service Center Managers |
Service centers that stock inventory must perform an annual physical inventory and reconcile to the inventory records. Inventory valuation must be submitted to Financial Management.
Service center managers should work with their departments to store documentation.
Inventories are defined as the aggregate of those items of tangible personal property which are held for sale in the normal course of business (e.g., supplies), or are to be consumed within one year in the production of a service (e.g., fuel). Some examples of inventory components include hospital pharmaceuticals and supplies; central, maintenance, mechanical and electrical stores; fuel, diesel, and coal; office and computer supplies; lumber; fabric; hand tools; and postage.
Annual physical inventory counts must be based on physical counts performed as of June 30. Service center staff must manually count all supplies and reconcile these numbers against the system inventory. Large variances must be investigated.
The value of inventory is determined by a physical count on a specific date and is recorded by valuing the actual inventory count in accordance with the inventory method used (e.g., FIFO, LIFO, weighted average, specific identification).
The FIFO (first-in, first-out) method of valuing inventory is illustrated below and is the preferred method. This method of recording inventories is based on the assumption that costs should be charged against revenue in the order in which they occurred. The inventory remaining on hand is presumed to consist of the most recent costs. The first goods acquired are the first goods out, and the last goods acquired are in the ending inventory.
Date | Units | Cost Per Unit | Total Cost |
---|---|---|---|
August 15 | 20,000 | $5.20 | $104,000 |
November 22 | 50,000 | $5.00 | $250,000 |
January 1 | 30,000 | $5.40 | $162,000 |
March 6 | 5,000 | $5.30 | $26,500 |
May 26 | 5,000 | $5.50 | $27,500 |
Total | 110,000 |
| $570,000 |
Ending Inventory per physical count is 14,000 units.
Date | Units | Cost Per Unit | Total Cost |
---|---|---|---|
May 26 | 5,000 | $5.50 | $27,500 |
March 6 | 5,000 | $5.50 | $27,500 |
January 1 | 4,000 | $5.50 | $22,000 |
Total | 14,000 |
| $77,000 |
Inventory Valuation is $77,000.
Task | Title or Department Responsible |
---|---|
Perform an annual physical inventory and reconcile to the inventory records. | Service Center Managers |
Ashley Butcher
Cost Accounting and Financial Reporting
Financial Management
Phone: 716-645-1521
Email: ambutche@buffalo.edu
Carrie Hutchins
IFR, Revenue Accounting and Treasury Management
Financial Management
Phone: 716-645-2640
Email: chutchin@buffalo.edu
Sean Wong
Cost Accounting and Financial Reporting
Financial Management
Phone: 716-645-2658
Email: seanyunc@buffalo.edu