June 19, 2012
June 19, 2012
Costing and Analysis
10.3.5. RATE SETTING
All usage must be tracked and factored into the rate calculation(s).
- All internal users must be charged the same rate(s) for the same level of service or products under the same circumstances. For more information, see section 10.3.5.D. Internal University User Rates.
- Rates are structured for internal and external users if services are provided to nonuniversity users. For more information, see section 10.3.5.E. External User Rates.
- Rates may be structured on a collaborative basis if such an agreement exists between a university department and an external college, university, federal agency, or other entity.
- Collaborator rates must be fully documented and must be included as part of the proposal package. The collaborative rate structure is negotiated on a case-by-case basis. For more information, see section 10.3.5.F. Collaborative User Rates.
- Rates must be developed to recover the full cost of operating the service center and clearly document any costs that are subsidized by the department or with university funding.
- Rates to off-campus entities must include the 26.5 percent institutional surcharge used to cover institutional facilities and administrative expenses.
C. Distribution Base (Units of Product or Service)
The distribution base used to calculate rates must be reasonable and have a causal/beneficial relationship to the cost objective.
Provide a description of how the base is estimated. For example, if effort is the base, it must be adjusted for holiday/sick/vacation leave, possible equipment/machine downtime, training, or breaks, etc. to arrive at available billable hours.
To calculate available billable hours:
Working days per year = 260 (52 weeks × 5 days)
Working hours per year = 2,080 (40 hrs × 52 weeks)
Annual vacation taken = 96 hrs (12 days × 8 hrs)
Holidays = 112 hrs (14 days × 8 hrs)
Sick leave = 48 hrs (12 months × 4 hrs)
Available working days per year = 232 (260 less vacation, holidays, and sick leave)
Available billable hours = 1,824 (2,080 – 256)
Percent of billable time = 87.7% (1,824÷2,080)
Internal users are university departments represented by charges to accounts over which The University of Texas at Austin has fiduciary responsibility.
- Internal user rates must be developed to recover total operating costs. Any subsidies must be clearly documented.
- All users of the service center must be billed at the approved rates and in a timely manner.
- Internal user rates cannot add charges to accumulate or establish reserve funds.
- All users must be charged the same rates regardless of the funding source.
- There is no discriminatory pricing for university departments for the same type of good or service.
- University departments include departments within colleges and schools, areas within academic affairs, research, finance and administration, or student affairs. It does not include direct support organizations such as the alumni associations, clubs, organizations, etc.
External users are entities or persons over whom The University of Texas at Austin has no fiduciary responsibility, regardless of the user’s relation to the university’s academic or research mission. External users include universities/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.
- The university is not allowed to subsidize external users. External service center rates are based on total operating costs, and the rate must include the 26.5 percent institutional surcharge used to cover institutional facilities and administrative expenses.
- Income derived from the 26.5 percent surcharge must be transferred into the Institutional Portion of Service Center Income (19-0220-0696) account.
- External user rates to corporate entities may charge a markup in excess of the revenue generated by the markup if used to subsidize allowable costs for internal users.
- If a surplus balance is created as a direct result of the additional markup on commercial rates, the additional revenue generated must be used to offset allowable cost pool expenses.
- A collaborative or consortium agreement exists when entities combine expertise and resources from multiple entities in accordance with the requirements of the sponsoring entity.
- On a case-by-case basis, a department may propose a rate structure based on an existing collaborative agreement between the unit and an external college, university, federal agency, or other entity.
- Usage is based on an existing collaborative agreement allowing collaborative users to receive the same rates applicable to internal users.
- To offer collaborative rates, a service center must provide a copy of the collaborative agreement showing the name of the sponsoring entity, sponsored project name and account, and names of all Principal Investigators (PIs) and entities included in the collaborative sponsored project. In addition, the service center must provide the scope of work detailing the usage of the service center within the collaborative sponsored project.
G. Multiple Rates
Separate rates for different services provided must be separately identified and made on an equitable basis that reflects the relative benefits each activity receives from the cost. Four categories of cost that need to be allocated:
- Salaries of staff performing multiple services.
- Equipment depreciation if the same equipment is utilized for multiple services.
- Institutional F&A costs in the case of specialized service facilities only
- All other consumable expenses.
H. Breakeven Rates
A service center must operate on a break-even basis; no surplus balance is allowed. A service center operating on a break-even basis has an effective balance of 10 percent of its total annual expenditures. The breakeven policy is designed to provide service center managers with some flexibility in dealing with unanticipated income or expense fluctuations.
To determine whether the service center is operating on a break-even basis, calculate the effective balance and the tolerable breakeven amount and compare them.
To calculate effective balance:
current year income
- current year expenses
+ balance forward
- accumulated depreciation for equipment maintenance or replacement
= effective balance
10 percent × current year (CY) expenses = tolerable breakeven amount
If the effective balance is greater than the tolerable breakeven amount, the service center is deemed to have a surplus.
- Surplus Balances (Over-recovery)
If a service center realizes a surplus, it can reduce the rates or refund the entire net over recovery to all its users, proportionately for that fiscal year.
- Deficit Balances (Under-recovery)
If a service center realizes a deficit, the service center manager must contact C&A at email@example.com to update cost pools and rates to prevent a future deficit.