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Handbook of Business Procedures

Date published: 
Last revised: 
Issued by: 

June 19, 2012
September 17, 2014
Federal Reporting

 

Part 10. Costing - Table of Contents


10.3.12. GLOSSARY

acquisition cost. Cost of acquiring materials, supplies, or capital assets to includes taxes, freight, and installation costs to place the materials and/or assets into intended use. For donated capital assets, acquisition cost is its fair market value at the time of the donation (plus any acquisition related expenses such as freight and installation).

annual salary. Salary paid to an employee before any deductions.

applicable credits. Transactions that offset or reduce costs, such as purchase discounts, rebates, allowances, refunds, etc. For purposes of charging service center costs to federally sponsored programs, applicable credits also include any direct federal financing of service center assets or operations (e.g., the direct funding of service center equipment by a federal program

billing rate. An amount established to charge for a specific service or good. The billing rate may vary by types of users and/or the service or good. However, rates charged to federal or state funds, either directly or indirectly, may not subsidize nonfederal or state users or rates in any way. The rate is determined by dividing the costs of a particular service/product by the distribution base. Billing rates may also include surcharges to nonuniversity users.

break-even period. Within a fiscal year an established period of time in which revenues and/or credits are expected to match expenses. Exceptions to the fiscal year include an approved long-term period.

capital equipment. A term used by some government agencies to identify equipment having an acquisition cost over a certain dollar amount and an expected service life of a certain number of years. For more information, see the Object Codes for Purchases of Furniture, Equipment, Animals, and Artifacts website.

carry-forward. The over- or under-recovery of operating expenses resulting from billing rates that do not recover expenses to operate the service center.

competition. Businesses not affiliated with the university that offer the same goods or services. As it relates to the private sector, the university does not engage in the sale of a good or service to the public unless the activity is related to or a byproduct of the university's mission (instruction, research, or outreach).

cost accounting standards. A set of uniform cost accounting principles, developed by the Office of Federal Procurement Policy Cost Accounting Standards Board, which must be followed by the university as a recipient of federal funds.

cost pool. A grouping of expense items used in the determination of cost of a function or activity.

cost recovery. The recovery of actual costs incurred. In terms of federal projects, the university normally enters into agreements with the government to charge only actual costs to the projects when the money is accepted.

deficit balance. The amount by which the costs of providing a service exceed the revenue generated by the service during a fiscal year.

depreciation. A method of allocating the capitalized cost of an asset over its useful life. Depreciation of donated equipment is calculated based on its fair market value at the time of the donation.

direct labor. All labor that is physically traceable to the finished good or service.

direct operating costs. All costs that can be specifically identified with a service provided by a service center. For example, salaries, wages and fringe benefits of university faculty and staff directly involved in providing the service, materials and supplies, purchased services, depreciation, etc.

effective balance. Used to determine whether a service center is operating on a break-even basis.

To calculate effective balance:
current year income
- current year expenses
+ balance forward
- accumulated depreciation for equipment maintenance or replacement
= effective balance

Tolerable breakeven amount = lesser of 20 percent x current year (CY) expenses, or CY expenses ÷ 12 x 2 months

If the effective balance is greater than the tolerable breakeven amount, the service center is deemed to have a surplus.

effort. The time devoted to the service center activity being measured, expressed as a percentage of the total time spent on all activities conducted under the terms of employment with the university.

external users. Entities or persons over whom the university has no fiduciary responsibility, regardless of the user’s relation to the university’s academic mission. External users include universities and colleges other than The University of Texas at Austin, commercial entities, nonaffiliated not-for-profit organizations, other state agencies, students, and members of faculty or staff acting in a personal capacity.

facilities and administrative (F&A) costs. The costs of administrative and supporting functions of the university; such as executive management, payroll, accounting and personnel administration; operations and maintenance expenses, such as utilities, building maintenance and custodial services; building depreciation and interest associated with the financing of buildings; administrative and supporting services provided by academic departments; libraries; and special administrative services provided to sponsored projects.

fully burdened. Fully burdened costs include all direct and indirect costs. Direct costs include salaries (including fringe), equipment/maintenance reserve, and consumables. Indirect costs include but are not limited to administrative support and operating costs for facilities.

general accepted accounting principles (GAAP). A set of codified accounting standards established by authoritative accounting rulemaking bodies, principally the Financial Accounting Standards Board or the Governmental Accounting Standards Board. Accounting practices deemed to be appropriate because of universal application over time.

hours. Actual Hours Worked. Total hours for which an employee was paid less vacation, sick, and holiday hours.

hours, available billable. Only those hours that are directly spent and billed to a specific project.

hours, base. The total hours available for an employee in the year. For full-time employees, this are 2080 available hours (assumes a 40 hour workweek for 52 weeks). For employees working less than full time, the base hours are adjusted according to the percentage of employment. For hourly employees (LTEs, students, etc.) hours worked and base hours are the same.

hours, unbillable. The portion of time that an employee who is directly involved in a project (as opposed to administrative or maintenance employees for example) spends on matters not directly chargeable to a project (e.g., cleanup, departmental meetings, break time, reading mail, etc.).

indirect cost. A cost or group of costs that are not directly identified with an activity.

indirect labor. All labor that is not direct labor.

internal users. Internal users are university departments represented by charges to accounts over which The University of Texas at Austin has fiduciary responsibility

rate documentation. All worksheets, spreadsheets, timesheets, analyses, calculations, and other paper work that support the computation of rate(s) charged for goods or services.

subsidy. Funds from a source other than funds generated by the service center to cover the costs of a particular service.

surplus balance. The amount by which the revenue generated by a service exceeds the costs of providing the service during a fiscal year.

total salary dollars. Annual salary (or base period used) plus fringe benefit dollars. Costs of fringe benefits are a cost of the period during which they are earned, whether or not used during that period. Therefore, when calculating total annual salary dollars, the cost of all fringe benefits related to salary earned that year are included.

unallowable costs. Costs that cannot be charged directly or indirectly to federally sponsored programs. These costs are specified in Circular A-21 issued by the U.S. Office of Management and Budget. Common examples of unallowable costs include advertising, alcoholic beverages, bad debts, charitable contributions, entertainment, fines and penalties, goods and services for personal use, interest (except interest related to the purchase or construction of buildings and equipment), selling and marketing expenses.

unrelated business income tax. Federal tax assessed to a not-for-profit organization in lieu of federal income tax on income generated by the organization from activities not related to the organization's mission. For more information, see the Handbook of Business Procedures, 5.4. Unrelated Business Income Tax (UBIT).

useful life. Expected life of an asset expressed in years.

 

 

Part 10. Costing - Table of Contents