Colorado School of Mines
Service Center Procedures
Colorado School of Mines
Service Center Procedures
Effective July 1, 2008



Table of Contents



I. PURPOSE

II. OVERVIEW

III. GENERAL GUIDELINES

IV. PROCEDURES
A. Create a Service Center
B. Determine Operating Costs
C. Calculate the User Fees
D. Obtain Approval of User Fees
E. Subsidies
F. Billing Procedures

1. Collect Funding Authorization from each user

2. Prepare and Submit Interdepartmental Sales and Service Vouchers

3. Make Entries into the Accounting System

4. External Users

V. DEFINITIONS

APPENDICES
Appendix A: Approaches to Subsidies
Appendix B: Sample Rate Calculation (Blank Form)
Appendix C: Funding Authorization Form
Appendix D: Sample Invoice/ISSV
Appendix E: Internal Billing Account Codes
Appendix F: Educational Business Activities Policy



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Colorado School of Mines
Service Center Procedures
I. PURPOSE

CSM conducts research under Government-funded agreements and service center
activities often result in charges, either directly or indirectly, to federally sponsored
awards. Therefore, service center procedures must reflect government regulatory costing
principles such as those contained in the Office of Management and Budget (OMB)
Circular No. A-21, "Cost Principles for Educational Institutions," (A-21).
http://www.whitehouse.gov/omb/circulars/a021/a021.html

Service center procedures have been established to provide consistent operational
practices among the various service center units, and to ensure compliance with both
government regulations and internal School accounting policies.

II. OVERVIEW

Service centers are organizational units that provide goods or services, principally to users
within CSM’s academic and administrative community. A service center recovers the cost
of its operations through charges to its users. Dissimilar services operated by the same
department – a computer facility vs. a copy center vs. a machine shop - must be
established as separate service center entities, with separate funds, budgets, and rates.

The cost of running the service center facility or providing the product is charged to users
on a "rate" basis. Rates are generally formulated to recover the costs of operations such
as salaries, benefits, maintenance, repairs, and supplies. A service center is an ongoing
activity.

For the purposes of this document, the word service center will apply to all types of
service center operations. The following terms are often used interchangeably:

A service center is usually a high dollar volume center that provides services to other
departments that do not necessarily include F&A costs in the rate charged.
A recharge center is usually organized for the convenience of a department and may have
a very low dollar volume.
A specialized service center is usually a highly complex or specialized facility that does a
large volume of business and has a material effect on the F&A rate. It can be described as
(but is not limited to) a configuration of complex equipment and highly trained personnel
providing technical support to research and educational activities. A specialized service
center will usually develop and incorporate its own indirect cost rate in order to recover
utilities, space, depreciation, and other F&A costs.

III. GENERAL GUIDELINES

The following applies to all service centers:

a.) Costs must be based on actual use of the services and the recharge center should be
operated as a break-even entity. Only federal allowable costs may be recovered in user

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Colorado School of Mines
Service Center Procedures
fees. No costs other than the costs incurred in providing the services should be included in
the billing rates. While the goal should be to set user fees at a level sufficient to cover non-
subsidized costs on a fiscal-year basis, it is recognized that this may not always be
possible. Usage of the breakeven period permits the development of more stable user
fees, and avoids significant user fee increases and decreases.

b.) Separate funds and accounts, as applicable, should be established in the School’s
accounting system to record the actual direct operating overhead, revenues, billing,
collections, and surplus or deficit for each service center.

c.) The rate schedule should not discriminate between federally and non-federally
supported activities of the School. All users, based on classification (i.e. internal user,
external user), should be charged for the services they receive and be charged at the
same rates.* In addition to recovering all direct costs, users may also be billed for indirect
costs, administrative fees, etc. This process of ‘fully loading’ or charging the indirect costs
to a user is usually limited to external users. Refer to the Educational Business Activities
Policy in appendix F.

d.) The billing rate computation should be documented and records should be maintained
by the service center to document the actual direct operating costs of providing the
services, revenues, units of service provided, billings, collections, and the annual surplus
or deficit. In accordance with OMB Circular A-110, Section C.53, all records pertaining to
recharge operation and service facility activity should be retained for four years.

e.) Service centers should review their rates/fee structure annually and revise rates as
necessary to incorporate any surpluses or deficits. A general guideline for a break-even
timeframe is three years. Service centers with sales to federally funded awards (fund’s
beginning with a “1” or “2”) should submit the proposed rates and documentation of
operating costs to the Office of Research Administration (ORA) annually by April 1st for the
upcoming fiscal year for approval. Final rates will be determined by June 1st for
implementation by July 1st. Documentation will be for the prior fiscal year.

f.) Service centers will adhere to both generally accepted accounting principles and
regulatory costing methods.
*
______________________________
See section IV.E. Regarding subsidies


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Colorado School of Mines
Service Center Procedures
IV. SERVICE CENTER PROCEDURES

A. Create a Service Center

Contact (ORA) for assistance in creating a new service center if you anticipate having a
recharge center that you anticipate will charge federally funded awards. A service center
fund will be established using an unrestricted fund with a prefix of ‘3x’ under an
appropriate organization. The department will designate a fund financial manager. The
fund financial manager is the individual responsible for maintaining and documenting the
billing rates and monitoring operating costs. This can also be, but is not necessarily, the
same person who is responsible for tracking usage, creating invoices or managing the
service center.

B. Determine Operating Costs

User fees must be based on and designed to recover no more than the federal allowable
operating costs for the goods or services being provided. Examples of federal allowable
operating costs include:

- Salaries and wages, and applicable university benefit rates

- Supplies and materials

-Subcontracts and outside services(e.g. maintenance contracts)

- Non-capital equipment lease or rental

- Prior-year operating deficit (increase to user fee);

- Prior-year operating surplus (decrease to user fee);

- Other directly-related expenses (e.g., travel, communications);

Costs that must not be in user fees because they are recovered through another
means, such as the indirect cost recovery mechanism, include:

- Building depreciation
- Facilities expense (utilities, maintenance, and custodial cost) paid by the School
and not recorded in the recharge operation or service facility account
- School and departmental overhead costs that are not charged to the recharge
operation or service facility account

- Purchase price or value of equipment

Costs that must not be in user fees because they are federal unallowable and
must not be recorded in recharge operation or service facility accounts include, but are not
limited to:

- Entertainment;

- Bad debt;

- Advertising;

- Public relations;

- Alcoholic beverages;

- Contributions and donations.

C. Calculate the User Fees

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Colorado School of Mines
Service Center Procedures

1. User fees are calculated in terms of units of output (a specified quantity of product from
a recharge operation or service facility, such as a copy, an hour of machine time, or an
hour of labor that acts as the basis for the calculation of a user fee).

2. Develop an estimate of the demand for each product or service in terms of units of
output. This can be derived from past results and/or using information from likely users.

Caution: When hours is the chosen unit of output, it is important to ensure that the total
hours used to calculate the user fee reflects estimated billable hours (hours demanded)
and not available hours (readiness to serve). Available hours do not directly relate to the
number of hours that will be demanded by and billed to your customers. Usage of
available hours may result in a lower user fee and an under-recovery of costs (operating
deficit). However, usage of billable hours will yield a user fee that reflects the actual costs
of providing the product/service.

3. Develop an expense estimate for each product or service provided based on the
demand estimate from step two above. Typical expenses include salaries & wages,
employee benefits, supplies, depreciation, communications charges, equipment repair and
maintenance, etc.

Caution: Federal unallowable expenses must not be included in the expense estimate
(see the "What Must Not be Included in a User Fee" segment of this document in Section
IV. B.).

4. Determine the amount of any applicable user fee subsidy.

5. Subtract the amount of any user fee subsidy from total estimated expenses to
determine net expenses.

6. Divide net expenses by the demand estimate from step 2 above to determine the user
fee for a particular product or service.

7. Multiply the demand estimate developed in step two above by the user fee calculated in
step 6 above to determine estimated revenue. The resulting revenue figure should equal
estimated expenses. The method selected to develop and calculate a compliant and
equitable user fee will vary depending upon the nature and complexity of the operation or
facility. Because user fees are developed using estimated revenues and expenses, there
may be some variance between estimated and actual revenues and expenses. This
variance is referred to as a "carry-forward."

Carry-forwards can be either positive or negative indicating either an operating surplus or
an operating deficit. If actual operating revenues exceed actual operating expenses, then
a surplus results, which must be factored into the development of subsequent user fee
calculations. Likewise, if actual operating expenses exceed actual operating revenues,

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Colorado School of Mines
Service Center Procedures
then a deficit results, which can also be factored into the development of subsequent user,
fee calculations.

Pursuant to OMB Circular A-21, Under no circumstances may an operating surplus
be transferred out of the recharge operation or service facility account to subsidize
other activities.

Please see Appendix B for a sample rate calculation.

D. Obtain Approval of User Fees

1. User fee calculations may occur at any time during the first year of operation. Once the
center is operating, the billing rates should be reviewed and revised annually.

2. Any service center operation with any amount of sales to federally funded projects
should submit the rate calculation to ORA for review and approval. All service center
operations should maintain documentation for the rate calculation and operating costs for
a period of 4 years.

3. Submit a proposed line-item budget as part of the fee approval process. Budgeted
expenses should be listed by account code group (e.g., Salaries and Wages, Benefits,
Supplies) for ease of review. Estimated revenues must be documented as proposed user
fee(s) multiplied by the estimated units of output. Estimated revenues should equal
budgeted expense plus or minus prior-year operating surplus or deficit.

4. The document submitted to ORA should include the service center’s fund and
organization, the fund financial manager, and the appropriate certification and signatures
(see Appendix B). If the facility occupies a room or rooms dedicated to its activity, the
building and room numbers in which the facility is located must also be provided with the
user fee.


E. Subsidies

Departments may choose to subsidize the operation of a recharge operation or service
facility. Before developing a user fee that includes a user fee subsidy, management
should carefully examine the economic factors and operating environment confronting the
recharge operation or service facility. Under normal circumstances, recharge operations
and service facilities should be able to cover operating expenses through non-subsidized
user charges.

The subsidizing of user fees should only occur after it is determined that:

1.
Doing so furthers the accomplishment of a primary mission area (i.e.,
instruction, research or public service); and

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Colorado School of Mines
Service Center Procedures
2.
the goods or services provided either are not available from sources
external to the School, or cannot be provided from external sources in a
more cost effective or efficient manner.
The continual subsidization of inefficient or non-competitive recharge operations and
service facilities redirects vital School resources from activities that could further the
accomplishment of the School’s primary missions.

See Appendix A for examples and different approaches to subsidizing service centers.

F. Billing Procedures

1.
Collect Funding Authorization from each user

Recharge center business managers are responsible for invoicing and collecting revenue
for their service center. In order to properly charge sponsored projects, the service center
manager will collect the authorization for funding source before the service is provided. A
sample “Service Center Funding Authorization” form (Appendix C) is completed and
signed by the principal investigator for each user of the service center. This form is
updated as frequently as necessary when the funding source changes, but not less
frequently than annually.

2.
Prepare and Submit Invoices

No less frequently than quarterly, Invoices should be prepared detailing the charging
information. (See Appendix D). These invoices differ slightly from the typical ISSV’s
because they include detailed information about the number of units used, the rate per
unit, the time period covered, and the total price. The debit will be the fund authorized by
the “Service Center Funding Authorization” and the credit will be the service center fund.
Typical account codes for service centers can be found in Appendix E.

3.
Make Entries into the Accounting System

Some of the larger, higher volume service center financial/business managers have been
authorized to enter the charges directly into the School’s finance system. Those
individuals will enter the information and then submit supporting documentation to the
appropriate office, ORA for sponsored programs and Controller’s office for non-sponsored
programs.

.

Once the transactions are entered and approved, they will appear in the Banner financial
accounting system.

For service center managers not entering their own transactions, an ISSV along with
supporting documentation should be submitted to the proper unit (ORA for sponsored
funds, Controller’s office for all other) for input into the accounting system.

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Colorado School of Mines
Service Center Procedures

Please note that if there are insufficient funds or if the charges fall beyond the end
date of the sponsored fund that was originally authorized, the individuals entering
the charges are authorized to charge the home organization.

4.
External Users

When billing customers outside the School community, the applicable negotiated indirect
cost rate should be added to the calculated user fee. Where applicable, sales tax must
also be charged to outside parties. Any amounts charged to outside parties in excess of
the regular internal School billing rates should be excluded from the computation of a
service center’s surpluses and deficits for the purposes of making carry-forward
adjustments to future rates. External Users must provide either a purchase order, credit
card, advance payment, or be a customer in good standing (customer with no delinquent
accounts). (Refer to University Facilities Use Policy)
Please contact ORA for information on processing external use payments.

Since revenues from outside parties may have Unrelated Business Income Tax (UBIT)
implications, the Controller’s Office will monitor revenue from external users.

V. DEFINITIONS

Allocable - A cost is allocable to a particular activity (i.e., a specific project, sponsored
agreement, department, or the like) if the cost (a) was incurred specifically for the activity;
(b) benefits both the activity and other activities, and can be distributed amongst them in
reasonable proportion to the benefits received; or (c) is necessary to the overall operation
of the activity, although a direct relationship can not be shown.

Break-even Period - A reasonable time-period over which cumulative revenue for a
service or product equals cumulative expenses. Generally, break-even periods do not
exceed three years.

Carry-forward - The over or under-recovery of operating costs from one period that is
included in the user fee calculation of a subsequent period to promote break-even
operations. Carry forwards are allowable cost adjustments to subsequent year user fee
computations.

Deficit -The amount by which a fund’s expenses exceed its revenues, net of any transfers.

Expense - An expenditure of the recharge operation or service facility incurred, whether
paid or accrued, that benefits only the current fiscal period.

External User - A recharge operation or service facility customer who does not pay for
goods or services with a School fund.


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Service Center Procedures
Federal Allowable Cost - A cost identified in Section J, in the OMB Circular A-21, as
reimbursable by the federal government, unless specifically superseded by the terms and
conditions of a sponsored program. Only federal allowable costs can be recovered
through recharge operation and service facility user fees (even if recovery is from non-
federal funds).

Federal Unallowable Cost - A cost identified in Section J, in the OMB Circular A-21 as
nonreimbursable by the federal government. Federal unallowable costs must be excluded
from recharge operation and service facility user fees. Examples of federal unallowable
costs include advertising of services/products, alcoholic beverages, bad debts,
entertainment (amusement and social activities), and fines and penalties.

Internal User - A recharge operation or service facility customer who pays for goods or
services using a School fund.

Operating Cost - The total cost of providing goods or services (e.g., supplies, salaries,
benefits, and depreciation).

Program Income - Gross income earned by the School that is 1) directly generated by a
sponsored program; or 2) earned as a result of a sponsored program.

Rate - Also known as Billing Rate or User Fee. The rate used to recover some or all of the
costs associated with producing a good or providing a service. The user fee may vary by
types of customers and/or services/products, however, user fees charged to federal funds,
either directly Service Center Procedures or indirectly, may not subsidize non-federal
users or user fees in any way. User fees may also include surcharges (i.e., facilities and
administrative costs) to non-School users in an effort to promote full costing.

Rate Subsidy - A subsidy provided to a service facility in order to lower the rate charged to
all customers for a given product or service. This subsidy covers operating deficits that
result from the charging of a reduced user fee. Caution: Rates charged to federal funds,
either directly or indirectly, must not subsidize non-federal users or rates in any way

Reasonable - A cost may be considered reasonable if the nature of the good or services
acquired or applied, and the amount involved therefore, reflect the action that a prudent
person would have taken under the circumstances prevailing at the time the decision to
incur the cost was made.

Revenue - Amount recovered for providing goods or services.

Surplus -The amount by which a fund’s revenues exceed expenses net of any transfers.

Unit of Output A specified quantity of product from a recharge operation or service facility,
such as a copy, an hour of machine time, or an hour of labor, that acts as the basis for the
calculation of a user fee.


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Colorado School of Mines
Service Center Procedures
Unrelated Business Income -Any activity that is:
- Carried on with a profit motive--an intention to produce a net income after
deducting all direct and indirect expenses
AND
- Regularly carried on (i.e., regularly occurring or seasonal, rather than intermittent,
casual, or sporadic)
AND
- Not "substantially related" to the School’s tax-exempt purpose (i.e., teaching and
research)
- Note: Activities that contribute importantly to the accomplishment of the School’s
tax-exempt purposes (other than by providing funds) are considered "related."
AND
- Not covered by specific IRS code exceptions (e.g., an activity conducted primarily
for the
convenience of the School community)

- Income from unrelated business is subject to taxation under IRS code Sections
511-513. Contact the Controller’s Office for assistance in the determination of what
constitutes unrelated business income.



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Colorado School of Mines
Service Center Procedures


APPENDIX A
Approaches to Subsidies


Option A
All users are charged less than the total cost of the goods or services provided.

Example: a service facility receives an appropriation from the school to defray costs not
included in the user fee. If there is no user fee subsidy to your service facility, record
expenses and revenues in one operating fund. If, however, there is a user fee subsidy,
record the dollar amount of the subsidy in a separate service facility fund with the
appropriate revenue fund.

Option B
Certain users are not charged for the cost of the goods or services provided.

Example: a department does not bill students for the use of a service facility. The
department must transfer allocations to the service facility fund to cover the cost of
providing the service to students. The lab manager must track the usage of all users in
order to determine the actual ‘rate’.



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Colorado School of Mines
Service Center Procedures
APPENDIX B
Sample Rate Calculation for Fiscal Year 2XXX

Expenditure Summary for <Lab Name> <FUND>
<ORG>
<DEPT>
Lab Manager: ______________________Fin Mgr (if different):______________________

Lab Location: ______________________


EXPENSES:


FY 2005
Salaries



57,697
Fringe Benefits


17,425
Supplies/Services

4,499
Machining




Equipment


3,245
Postage



53
Phone



21
Copying



48
Maintenance


22,869
Travel



(1,216)
Total Expenses


104,641
All expenses for the FY are included and
should tie out to 104,641 Banner.
Projections can be used for the last
quarter.

Less Unallowables:
Equipment 3,245
Since equipment depreciation expense is
already included in the F&A rate, equip.
purchases are not allowed
Phone (T01)
Other
Total Unallowables

3,245
Total Allowable Expenses
101,396

REVENUE: 92,256
Revenue is actual revenue from Banner
through the third quarter
Revenue - Expenses: (Carry forward) (9,140) any carry forward (surplus or deficit) must
be taken into account and the rate
adjusted accordingly
Total Expenses plus Revenue Shortfall 110,536


Total Logged Hours 2,194
The “base” for the rate can be a
combination of actual use plus projections
for the upcoming FY


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Colorado School of Mines
Service Center Procedures
Actual Rate for FY 05 $ 50.38 Total expenses plus/minus carryover
divided by usage units

Rate for External Users with Overhead $ 77.72 A separate calculation on MTDC costs is







necessary for external users

Certification: I certify that these calculations are consistent with past performance and
future estimates. I understand that if deficits occur I will be required to raise the rates to
compensate or cover the deficit from Departmental or Division Sources:

Lab Manager/Financial Manager Signature: _____________________________

Department Chair or Center Director: __________________________________

Dean or VP for Research as appropriate: _______________________________



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Colorado School of Mines
Service Center Procedures
APPENDIX C
Service Center Funding Authorization Form



(Blank Form)

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Colorado School of Mines
Service Center Procedures
APPENDIX D
Sample Recharge Center Invoice


Sample Invoice

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Colorado School of Mines
Service Center Procedures
APPENDIX E
Typical account codes

Internal service charges



5306
Internal sales and services



7000
Interdepartmental sale of supplies


7904
Interdepartmental sales – Technical assistance
7913
Interdepartmental sales – Equipment use

7914

Other sales/services(for external users)

4517


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Colorado School of Mines
Service Center Procedures

Appendix F
Educational Business Activities Policy



EBA Policy

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Colorado School of Mines
Service Center Procedures
Colorado School of Mines
Service Center Procedures
Effective July 1, 2008



Table of Contents



I. PURPOSE

II. OVERVIEW

III. GENERAL GUIDELINES

IV. PROCEDURES
A. Create a Service Center
B. Determine Operating Costs
C. Calculate the User Fees
D. Obtain Approval of User Fees
E. Subsidies
F. Billing Procedures

1. Collect Funding Authorization from each user

2. Prepare and Submit Interdepartmental Sales and Service Vouchers

3. Make Entries into the Accounting System

4. External Users

V. DEFINITIONS

APPENDICES
Appendix A: Approaches to Subsidies
Appendix B: Sample Rate Calculation (Blank Form)
Appendix C: Funding Authorization Form
Appendix D: Sample Invoice/ISSV
Appendix E: Internal Billing Account Codes
Appendix F: Educational Business Activities Policy



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Colorado School of Mines
Service Center Procedures
I. PURPOSE

CSM conducts research under Government-funded agreements and service center
activities often result in charges, either directly or indirectly, to federally sponsored
awards. Therefore, service center procedures must reflect government regulatory costing
principles such as those contained in the Office of Management and Budget (OMB)
Circular No. A-21, "Cost Principles for Educational Institutions," (A-21).
http://www.whitehouse.gov/omb/circulars/a021/a021.html

Service center procedures have been established to provide consistent operational
practices among the various service center units, and to ensure compliance with both
government regulations and internal School accounting policies.

II. OVERVIEW

Service centers are organizational units that provide goods or services, principally to users
within CSM’s academic and administrative community. A service center recovers the cost
of its operations through charges to its users. Dissimilar services operated by the same
department – a computer facility vs. a copy center vs. a machine shop - must be
established as separate service center entities, with separate funds, budgets, and rates.

The cost of running the service center facility or providing the product is charged to users
on a "rate" basis. Rates are generally formulated to recover the costs of operations such
as salaries, benefits, maintenance, repairs, and supplies. A service center is an ongoing
activity.

For the purposes of this document, the word service center will apply to all types of
service center operations. The following terms are often used interchangeably:

A service center is usually a high dollar volume center that provides services to other
departments that do not necessarily include F&A costs in the rate charged.
A recharge center is usually organized for the convenience of a department and may have
a very low dollar volume.
A specialized service center is usually a highly complex or specialized facility that does a
large volume of business and has a material effect on the F&A rate. It can be described as
(but is not limited to) a configuration of complex equipment and highly trained personnel
providing technical support to research and educational activities. A specialized service
center will usually develop and incorporate its own indirect cost rate in order to recover
utilities, space, depreciation, and other F&A costs.

III. GENERAL GUIDELINES

The following applies to all service centers:

a.) Costs must be based on actual use of the services and the recharge center should be
operated as a break-even entity. Only federal allowable costs may be recovered in user

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Colorado School of Mines
Service Center Procedures
fees. No costs other than the costs incurred in providing the services should be included in
the billing rates. While the goal should be to set user fees at a level sufficient to cover non-
subsidized costs on a fiscal-year basis, it is recognized that this may not always be
possible. Usage of the breakeven period permits the development of more stable user
fees, and avoids significant user fee increases and decreases.

b.) Separate funds and accounts, as applicable, should be established in the School’s
accounting system to record the actual direct operating overhead, revenues, billing,
collections, and surplus or deficit for each service center.

c.) The rate schedule should not discriminate between federally and non-federally
supported activities of the School. All users, based on classification (i.e. internal user,
external user), should be charged for the services they receive and be charged at the
same rates.* In addition to recovering all direct costs, users may also be billed for indirect
costs, administrative fees, etc. This process of ‘fully loading’ or charging the indirect costs
to a user is usually limited to external users. Refer to the Educational Business Activities
Policy in appendix F.

d.) The billing rate computation should be documented and records should be maintained
by the service center to document the actual direct operating costs of providing the
services, revenues, units of service provided, billings, collections, and the annual surplus
or deficit. In accordance with OMB Circular A-110, Section C.53, all records pertaining to
recharge operation and service facility activity should be retained for four years.

e.) Service centers should review their rates/fee structure annually and revise rates as
necessary to incorporate any surpluses or deficits. A general guideline for a break-even
timeframe is three years. Service centers with sales to federally funded awards (fund’s
beginning with a “1” or “2”) should submit the proposed rates and documentation of
operating costs to the Office of Research Administration (ORA) annually by April 1st for the
upcoming fiscal year for approval. Final rates will be determined by June 1st for
implementation by July 1st. Documentation will be for the prior fiscal year.

f.) Service centers will adhere to both generally accepted accounting principles and
regulatory costing methods.
*
______________________________
See section IV.E. Regarding subsidies


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Colorado School of Mines
Service Center Procedures
IV. SERVICE CENTER PROCEDURES

A. Create a Service Center

Contact (ORA) for assistance in creating a new service center if you anticipate having a
recharge center that you anticipate will charge federally funded awards. A service center
fund will be established using an unrestricted fund with a prefix of ‘3x’ under an
appropriate organization. The department will designate a fund financial manager. The
fund financial manager is the individual responsible for maintaining and documenting the
billing rates and monitoring operating costs. This can also be, but is not necessarily, the
same person who is responsible for tracking usage, creating invoices or managing the
service center.

B. Determine Operating Costs

User fees must be based on and designed to recover no more than the federal allowable
operating costs for the goods or services being provided. Examples of federal allowable
operating costs include:

- Salaries and wages, and applicable university benefit rates

- Supplies and materials

-Subcontracts and outside services(e.g. maintenance contracts)

- Non-capital equipment lease or rental

- Prior-year operating deficit (increase to user fee);

- Prior-year operating surplus (decrease to user fee);

- Other directly-related expenses (e.g., travel, communications);

Costs that must not be in user fees because they are recovered through another
means, such as the indirect cost recovery mechanism, include:

- Building depreciation
- Facilities expense (utilities, maintenance, and custodial cost) paid by the School
and not recorded in the recharge operation or service facility account
- School and departmental overhead costs that are not charged to the recharge
operation or service facility account

- Purchase price or value of equipment

Costs that must not be in user fees because they are federal unallowable and
must not be recorded in recharge operation or service facility accounts include, but are not
limited to:

- Entertainment;

- Bad debt;

- Advertising;

- Public relations;

- Alcoholic beverages;

- Contributions and donations.

C. Calculate the User Fees

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Colorado School of Mines
Service Center Procedures

1. User fees are calculated in terms of units of output (a specified quantity of product from
a recharge operation or service facility, such as a copy, an hour of machine time, or an
hour of labor that acts as the basis for the calculation of a user fee).

2. Develop an estimate of the demand for each product or service in terms of units of
output. This can be derived from past results and/or using information from likely users.

Caution: When hours is the chosen unit of output, it is important to ensure that the total
hours used to calculate the user fee reflects estimated billable hours (hours demanded)
and not available hours (readiness to serve). Available hours do not directly relate to the
number of hours that will be demanded by and billed to your customers. Usage of
available hours may result in a lower user fee and an under-recovery of costs (operating
deficit). However, usage of billable hours will yield a user fee that reflects the actual costs
of providing the product/service.

3. Develop an expense estimate for each product or service provided based on the
demand estimate from step two above. Typical expenses include salaries & wages,
employee benefits, supplies, depreciation, communications charges, equipment repair and
maintenance, etc.

Caution: Federal unallowable expenses must not be included in the expense estimate
(see the "What Must Not be Included in a User Fee" segment of this document in Section
IV. B.).

4. Determine the amount of any applicable user fee subsidy.

5. Subtract the amount of any user fee subsidy from total estimated expenses to
determine net expenses.

6. Divide net expenses by the demand estimate from step 2 above to determine the user
fee for a particular product or service.

7. Multiply the demand estimate developed in step two above by the user fee calculated in
step 6 above to determine estimated revenue. The resulting revenue figure should equal
estimated expenses. The method selected to develop and calculate a compliant and
equitable user fee will vary depending upon the nature and complexity of the operation or
facility. Because user fees are developed using estimated revenues and expenses, there
may be some variance between estimated and actual revenues and expenses. This
variance is referred to as a "carry-forward."

Carry-forwards can be either positive or negative indicating either an operating surplus or
an operating deficit. If actual operating revenues exceed actual operating expenses, then
a surplus results, which must be factored into the development of subsequent user fee
calculations. Likewise, if actual operating expenses exceed actual operating revenues,

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Service Center Procedures
then a deficit results, which can also be factored into the development of subsequent user,
fee calculations.

Pursuant to OMB Circular A-21, Under no circumstances may an operating surplus
be transferred out of the recharge operation or service facility account to subsidize
other activities.

Please see Appendix B for a sample rate calculation.

D. Obtain Approval of User Fees

1. User fee calculations may occur at any time during the first year of operation. Once the
center is operating, the billing rates should be reviewed and revised annually.

2. Any service center operation with any amount of sales to federally funded projects
should submit the rate calculation to ORA for review and approval. All service center
operations should maintain documentation for the rate calculation and operating costs for
a period of 4 years.

3. Submit a proposed line-item budget as part of the fee approval process. Budgeted
expenses should be listed by account code group (e.g., Salaries and Wages, Benefits,
Supplies) for ease of review. Estimated revenues must be documented as proposed user
fee(s) multiplied by the estimated units of output. Estimated revenues should equal
budgeted expense plus or minus prior-year operating surplus or deficit.

4. The document submitted to ORA should include the service center’s fund and
organization, the fund financial manager, and the appropriate certification and signatures
(see Appendix B). If the facility occupies a room or rooms dedicated to its activity, the
building and room numbers in which the facility is located must also be provided with the
user fee.


E. Subsidies

Departments may choose to subsidize the operation of a recharge operation or service
facility. Before developing a user fee that includes a user fee subsidy, management
should carefully examine the economic factors and operating environment confronting the
recharge operation or service facility. Under normal circumstances, recharge operations
and service facilities should be able to cover operating expenses through non-subsidized
user charges.

The subsidizing of user fees should only occur after it is determined that:

1.
Doing so furthers the accomplishment of a primary mission area (i.e.,
instruction, research or public service); and

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Service Center Procedures
2.
the goods or services provided either are not available from sources
external to the School, or cannot be provided from external sources in a
more cost effective or efficient manner.
The continual subsidization of inefficient or non-competitive recharge operations and
service facilities redirects vital School resources from activities that could further the
accomplishment of the School’s primary missions.

See Appendix A for examples and different approaches to subsidizing service centers.

F. Billing Procedures

1.
Collect Funding Authorization from each user

Recharge center business managers are responsible for invoicing and collecting revenue
for their service center. In order to properly charge sponsored projects, the service center
manager will collect the authorization for funding source before the service is provided. A
sample “Service Center Funding Authorization” form (Appendix C) is completed and
signed by the principal investigator for each user of the service center. This form is
updated as frequently as necessary when the funding source changes, but not less
frequently than annually.

2.
Prepare and Submit Invoices

No less frequently than quarterly, Invoices should be prepared detailing the charging
information. (See Appendix D). These invoices differ slightly from the typical ISSV’s
because they include detailed information about the number of units used, the rate per
unit, the time period covered, and the total price. The debit will be the fund authorized by
the “Service Center Funding Authorization” and the credit will be the service center fund.
Typical account codes for service centers can be found in Appendix E.

3.
Make Entries into the Accounting System

Some of the larger, higher volume service center financial/business managers have been
authorized to enter the charges directly into the School’s finance system. Those
individuals will enter the information and then submit supporting documentation to the
appropriate office, ORA for sponsored programs and Controller’s office for non-sponsored
programs.

.

Once the transactions are entered and approved, they will appear in the Banner financial
accounting system.

For service center managers not entering their own transactions, an ISSV along with
supporting documentation should be submitted to the proper unit (ORA for sponsored
funds, Controller’s office for all other) for input into the accounting system.

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Please note that if there are insufficient funds or if the charges fall beyond the end
date of the sponsored fund that was originally authorized, the individuals entering
the charges are authorized to charge the home organization.

4.
External Users

When billing customers outside the School community, the applicable negotiated indirect
cost rate should be added to the calculated user fee. Where applicable, sales tax must
also be charged to outside parties. Any amounts charged to outside parties in excess of
the regular internal School billing rates should be excluded from the computation of a
service center’s surpluses and deficits for the purposes of making carry-forward
adjustments to future rates. External Users must provide either a purchase order, credit
card, advance payment, or be a customer in good standing (customer with no delinquent
accounts). (Refer to University Facilities Use Policy)
Please contact ORA for information on processing external use payments.

Since revenues from outside parties may have Unrelated Business Income Tax (UBIT)
implications, the Controller’s Office will monitor revenue from external users.

V. DEFINITIONS

Allocable - A cost is allocable to a particular activity (i.e., a specific project, sponsored
agreement, department, or the like) if the cost (a) was incurred specifically for the activity;
(b) benefits both the activity and other activities, and can be distributed amongst them in
reasonable proportion to the benefits received; or (c) is necessary to the overall operation
of the activity, although a direct relationship can not be shown.

Break-even Period - A reasonable time-period over which cumulative revenue for a
service or product equals cumulative expenses. Generally, break-even periods do not
exceed three years.

Carry-forward - The over or under-recovery of operating costs from one period that is
included in the user fee calculation of a subsequent period to promote break-even
operations. Carry forwards are allowable cost adjustments to subsequent year user fee
computations.

Deficit -The amount by which a fund’s expenses exceed its revenues, net of any transfers.

Expense - An expenditure of the recharge operation or service facility incurred, whether
paid or accrued, that benefits only the current fiscal period.

External User - A recharge operation or service facility customer who does not pay for
goods or services with a School fund.


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Federal Allowable Cost - A cost identified in Section J, in the OMB Circular A-21, as
reimbursable by the federal government, unless specifically superseded by the terms and
conditions of a sponsored program. Only federal allowable costs can be recovered
through recharge operation and service facility user fees (even if recovery is from non-
federal funds).

Federal Unallowable Cost - A cost identified in Section J, in the OMB Circular A-21 as
nonreimbursable by the federal government. Federal unallowable costs must be excluded
from recharge operation and service facility user fees. Examples of federal unallowable
costs include advertising of services/products, alcoholic beverages, bad debts,
entertainment (amusement and social activities), and fines and penalties.

Internal User - A recharge operation or service facility customer who pays for goods or
services using a School fund.

Operating Cost - The total cost of providing goods or services (e.g., supplies, salaries,
benefits, and depreciation).

Program Income - Gross income earned by the School that is 1) directly generated by a
sponsored program; or 2) earned as a result of a sponsored program.

Rate - Also known as Billing Rate or User Fee. The rate used to recover some or all of the
costs associated with producing a good or providing a service. The user fee may vary by
types of customers and/or services/products, however, user fees charged to federal funds,
either directly Service Center Procedures or indirectly, may not subsidize non-federal
users or user fees in any way. User fees may also include surcharges (i.e., facilities and
administrative costs) to non-School users in an effort to promote full costing.

Rate Subsidy - A subsidy provided to a service facility in order to lower the rate charged to
all customers for a given product or service. This subsidy covers operating deficits that
result from the charging of a reduced user fee. Caution: Rates charged to federal funds,
either directly or indirectly, must not subsidize non-federal users or rates in any way

Reasonable - A cost may be considered reasonable if the nature of the good or services
acquired or applied, and the amount involved therefore, reflect the action that a prudent
person would have taken under the circumstances prevailing at the time the decision to
incur the cost was made.

Revenue - Amount recovered for providing goods or services.

Surplus -The amount by which a fund’s revenues exceed expenses net of any transfers.

Unit of Output A specified quantity of product from a recharge operation or service facility,
such as a copy, an hour of machine time, or an hour of labor, that acts as the basis for the
calculation of a user fee.


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Service Center Procedures
Unrelated Business Income -Any activity that is:
- Carried on with a profit motive--an intention to produce a net income after
deducting all direct and indirect expenses
AND
- Regularly carried on (i.e., regularly occurring or seasonal, rather than intermittent,
casual, or sporadic)
AND
- Not "substantially related" to the School’s tax-exempt purpose (i.e., teaching and
research)
- Note: Activities that contribute importantly to the accomplishment of the School’s
tax-exempt purposes (other than by providing funds) are considered "related."
AND
- Not covered by specific IRS code exceptions (e.g., an activity conducted primarily
for the
convenience of the School community)

- Income from unrelated business is subject to taxation under IRS code Sections
511-513. Contact the Controller’s Office for assistance in the determination of what
constitutes unrelated business income.



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APPENDIX A
Approaches to Subsidies


Option A
All users are charged less than the total cost of the goods or services provided.

Example: a service facility receives an appropriation from the school to defray costs not
included in the user fee. If there is no user fee subsidy to your service facility, record
expenses and revenues in one operating fund. If, however, there is a user fee subsidy,
record the dollar amount of the subsidy in a separate service facility fund with the
appropriate revenue fund.

Option B
Certain users are not charged for the cost of the goods or services provided.

Example: a department does not bill students for the use of a service facility. The
department must transfer allocations to the service facility fund to cover the cost of
providing the service to students. The lab manager must track the usage of all users in
order to determine the actual ‘rate’.



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APPENDIX B
Sample Rate Calculation for Fiscal Year 2XXX

Expenditure Summary for <Lab Name> <FUND>
<ORG>
<DEPT>
Lab Manager: ______________________Fin Mgr (if different):______________________

Lab Location: ______________________


EXPENSES:


FY 2005
Salaries



57,697
Fringe Benefits


17,425
Supplies/Services

4,499
Machining




Equipment


3,245
Postage



53
Phone



21
Copying



48
Maintenance


22,869
Travel



(1,216)
Total Expenses


104,641
All expenses for the FY are included and
should tie out to 104,641 Banner.
Projections can be used for the last
quarter.

Less Unallowables:
Equipment 3,245
Since equipment depreciation expense is
already included in the F&A rate, equip.
purchases are not allowed
Phone (T01)
Other
Total Unallowables

3,245
Total Allowable Expenses
101,396

REVENUE: 92,256
Revenue is actual revenue from Banner
through the third quarter
Revenue - Expenses: (Carry forward) (9,140) any carry forward (surplus or deficit) must
be taken into account and the rate
adjusted accordingly
Total Expenses plus Revenue Shortfall 110,536


Total Logged Hours 2,194
The “base” for the rate can be a
combination of actual use plus projections
for the upcoming FY


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Colorado School of Mines
Service Center Procedures
Actual Rate for FY 05 $ 50.38 Total expenses plus/minus carryover
divided by usage units

Rate for External Users with Overhead $ 77.72 A separate calculation on MTDC costs is







necessary for external users

Certification: I certify that these calculations are consistent with past performance and
future estimates. I understand that if deficits occur I will be required to raise the rates to
compensate or cover the deficit from Departmental or Division Sources:

Lab Manager/Financial Manager Signature: _____________________________

Department Chair or Center Director: __________________________________

Dean or VP for Research as appropriate: _______________________________



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APPENDIX C
Service Center Funding Authorization Form



(Blank Form)

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APPENDIX D
Sample Recharge Center Invoice


Sample Invoice

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APPENDIX E
Typical account codes

Internal service charges



5306
Internal sales and services



7000
Interdepartmental sale of supplies


7904
Interdepartmental sales – Technical assistance
7913
Interdepartmental sales – Equipment use

7914

Other sales/services(for external users)

4517


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Appendix F
Educational Business Activities Policy



EBA Policy

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