Service Center Administration Finance and Accounting Procedures

Finance and Accounting Manual

Purpose

Service centers are subject to strict federal regulatory requirements concerning the methodology used for rate development, the allowable cost components for the rates, and the general financial management of service centers. All service centers operate under the federal guidelines as promulgated in CFR Title 2 Subtitle A Chapter II Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart E – Cost Principles and other federal and University regulations and procedures as enumerated in this Boston University Service Center Finance and Accounting Manual. The following sections provide detailed guidance so centers can operate in compliance with the regulations.

Covered Parties

The information in this section is intended to provide service center directors, administrative personnel, the Core User Committee, the Core Advisory Committee, the Associate Dean for Research (BUSM), and the Associate Provost/VP Research with a brief summary of the requirements and templates that will assist with the service center review and approval process.

Definitions

Applicable Credit

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 or personnel by a federal program).

Auxiliary Enterprise

An activity that provides goods or services primarily to students, faculty, staff, and others for his/her own personal use, rather than as a service to internal University operations. Examples of auxiliary enterprises include residence halls, dining services, and parking services. Auxiliary enterprises are not subject to this Policy Statement.

Billing Rate

The amount charged to a user for a unit of a good or service. Billing rates are computed by dividing the total annual costs of a service by the total number of billing units expected to be provided to users of the service for the year.

Billing Unit

The unit of service provided by a service center. Examples of billing units include hours of service, animal care days, tests performed, equipment time used, etc.

Deficit

The amount that the cost of providing a service exceeds the revenue generated by the service during a fiscal year.

Direct Operating Costs

All costs that can be specifically identified with a service provided by a service center. All direct costs must be budgeted and charged directly to the service center. These costs include the salaries, wages, and fringe benefits of University faculty and staff directly involved in providing the service, materials and supplies, purchased services, travel expenses, equipment rental or depreciation, and interest associated with equipment acquisitions (if over $10,000 and preapproved).

Equipment

An item of tangible property having a useful life equal to one year or more and an acquisition cost of $5,000 or more. Purchases below this amount are considered minor equipment or consumable supplies. Please reference the University’s definition of general ledger codes for proper classification of expenses: general ledger codes and descriptions.

Facilities and Administrative Costs

Facilities and Administrative (F&A) costs are also known as “indirect costs” or “overhead” and they are the costs of administrative and support functions of the University. F&A costs consist of general administration and general expenses, such as executive management, payroll, accounting, and human resource 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.

Guarantee Account

Account to be used to offset any deficit above the amount which can be carried forward into future rates.

Internal Service Center Administrative Overhead

All costs that can be specifically identified to the operations of a service center, but not with a particular service provided by the center, such as a portion of the salary and fringe benefits of the service center director, the administrative staff, office expenses, etc.

Recharge Activity

Recharge operations are departmental units which provide goods and/or services, primarily to University departments, for a fee and have total annual direct costs of providing those goods and/or services of less than $50,000. Billing rates include direct costs only.

Service Center

A service center (SC) is an organizational unit which provides a specific type of good or service to Boston University departments, rather than to individuals or the general public, and is supported by interdepartmental charges to the user’s operating accounts. The users typically determine the amount of goods/services they obtain. Such a good/service might be purchased from commercial sources, but for reasons of convenience, cost, or control, often is provided more effectively through a BU service center. The rates charged by a SC generally are formulated to recover operating costs. SCs provide activities for which a Rate Schedule is required and:

• are established primarily to provide goods/services to other BU departments, sponsored
  programs, or activities;
• operate as a discrete unit having control of revenues and expenses with ongoing
  activities;
• charge all INTERNAL users equally for services at a rate calculated to recover their costs
  over a fixed period of time; and
• sales to external entities, if any, usually are incidental.

Specialized Service Facility (SSF)

This facility provides the services of a highly complex or specialized facility, such as electronic
computer centers, animal care facilities, wind tunnels, reactors, and genomic array processing,
generally with annual operating expenses of $1,000,000 or greater.

Surplus

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

Unallowable Costs

Costs that cannot be charged directly or indirectly to sponsored programs. These costs are
specified in the Uniform Guidance issued by the Federal 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.

Useful Life

The estimated time period over which capital equipment and buildings will provide useful service. The University determines the useful life of equipment.

Financial and Accounting Procedures for Service Centers

A service center is often referred to as a “core facility” and operates similar to a small business – engaging various combinations of faculty, staff, supplies, and equipment to provide the goods and services. The center invoices and charges the users based upon an approved rate schedule. Occasionally, outside entities may utilize service centers, though priority is expected to be given to internal BU users. The director of the center has responsibility for its operational and financial management.

Business Plan

Development of a strong business plan is an important factor in determining the actual need for the core, the services provided, its uses and users, and allows for the assessment of the potential for viability of a service center and its projected financial stability. Additionally, the information provided assists in estimating any central support that will be required to operate the service center. The Business Plan Template provides the document that is required for all service centers.

Rate Development

General Process:

The actual costs and revenues for a service center must be reviewed at least once during a fiscal year. There must be 12 months of revenue and expenses (or a lesser but equal number if this is a new center started after the beginning of the fiscal year). Deficits or surpluses within +/- 15% of total operating costs should be carried forward as an adjustment to the billing rates of the following year or the next succeeding year. Rates and expenses should be reviewed and adjusted mid-year as necessary to avoid fluctuations in excess of the 15% threshold. Deficits in excess of 15% should generally be written off. Surpluses in excess of 15% are generally refunded to the users/sponsors that paid the higher costs.

Multiple Services:

Where a service center provides different types of services to users, separate billing rates should be established for each service that represents a significant activity of the service center. The costs and revenues should also be separately identified for each service. Any material surpluses or deficits should be carried forward as an adjustment (subject to the +/- 15% carry forward limit) to the billing rate for that service in the following year or the next succeeding year. The Rate Development Worksheet has built in formulae to distribute the surplus/deficit to the various lines of service. The surplus from one service may be used to offset the deficit from another service only if the mix of users and level of services provided to each group of users is approximately the same.

Cost Allocations:

Where separate billing rates are used for different services provided by a service center, the costs related to each service must be separately identified through a cost allocation process. Cost allocations also will be needed where a cost partially relates to the operations of a service center and partially to other activities of a department or other organizational unit. Cost allocations are to be made on an equitable basis that reflects the relative benefits each activity receives from the cost. For example, if an employee provides multiple services, an equitable distribution of his or her salary among the services can usually be accomplished by using the proportional amount of time the employee spends on each service. Other cost allocation techniques may be used for internal service center administrative overhead and institutional indirect costs, such as the proportional amount of direct costs associated with each service, space utilized, etc.

Rate Development Templates:

To facilitate the development and review of rates for goods and services charged by individual service centers, Service Center Administration has developed templates that should be used to assist in developing rates for new services and service centers as well as existing rates. Smaller service centers with 3 services or less should use the 3 Services Template, while larger centers with a wider variety of services should use the 10 Services Template. Service center directors should reference the following Service Center Calculations Instructions for specific guidance regarding the usage of these templates.

In addition, the development and review of service center rates should adhere to the following principles:

• Billing rates should be designed to fully recover the direct operating costs of providing the services on an annual basis, and for SSFs, all relevant and allowable F&A costs. No costs other than the costs incurred in providing the services can be included in the internal billing rates.
• The costs to be recovered must exclude unallowable costs and be net of applicable credits.
• Depending on the specific circumstances involved, there may be four categories of cost that need to be allocated:
  • Costs that are directly related to providing the services, such as the salaries and fringe benefits (at the current federally negotiated rates) of staff performing multiple services. Please note that for any faculty salaries included in the rate, costs in excess of the NIH salary cap must be excluded from the rate computation.
  • Internal service center administrative overhead
  • Institutional indirect costs (applicable and allowable to SSFs only)
  • Equipment depreciation cost
• Service Centers may propose differential pricing for peak times and/or emergency services so long as all users are charged in accordance with the approved pricing schedule and the non-peak hours and/or non-emergency services are readily available to all users without discrimination as to user and/or source of funding.

Rate Development Timing and Review

Billing rates should be reviewed annually for the start of each fiscal year. (Note that OMB Uniform Guidance mandates that rates for SSFs be adjusted at least on a biennial basis.) The Rate Development Process is synchronous with the Budget Development Process. Service centers should develop and submit proposed rates to Service Center Administration at the time of Submission of Stage I budgets, which generally occurs in the fall. These rates should be based on costs and revenues for the most recent fiscal year close. Rates may be adjusted for the Stage II Budget Submission based on review and feedback provided by Service Center Administration. Unless there are any further changes, those rates will be reviewed, and if acceptable, approved for use effective in July for the new budget year.

External Users

In general, the rates for external users must include the calculated Boston University On Campus Research F&A rate in the price (currently 78% based on BU’s most recent negotiation with the Department of Health and Human Services Division of Cost Allocation). External rates also may include premiums or other fees in addition to the On Campus Research F&A rate. External rates calculated on the full F&A basis are approved by Service Center Administration. External rates calculated at lesser rates of F&A (applicable to non-profit clients only) should be requested using the “Service Center External Rate Reduction Request Form” and submitted to Service Center Administration. They will review the proposed rates with the appropriate Provost’s Office, who is responsible for the review and approval of reduced rates. In no instance can an external user be charged less than the Boston University internal rate.

Work for external entities should be performed with a formal contract executed between Boston University and the External Entity. This agreement defines the work to be performed, the costs for the work, and all rights, limitations, and obligations of the parties. If you contemplate performing work for an external client, our office will work with you and the Office of General Counsel to develop a formal contract.

Institutional Subsidies

In some instances, the University, college/school, or department may elect to subsidize the operations of a service center, either by charging billing rates that are intended to be lower than total costs or by not making adjustments to future rates for a service center’s deficits. The portion of service center deficits funded by institutional subsidies cannot be carried forward as adjustments to future billing rates. Since subsidies result in a loss of funds to the University, they must be approved by the Provost, Dean, and/or Department Chair and should be provided only when there is a sound programmatic reason and approved by the school in which the service center resides. Subsidies generally are provided where the service is deemed essential to the mission of the University and the cost of providing the service is so high as to preclude usage by those requiring the services. In addition, subsidies may be required in the initial term of operation, where the usage volume is too low to adequately cover costs.

Rate Review Threshold

Service centers with annual expenses less than $100,000 must complete the annual rate documentation by completing the Rate Development Worksheet and have it available for review upon request from Service Center Administration. Centers with annual expenses of $100,000 or greater must submit the Rate Development Worksheet to Service Center Administration for review and approval. Any changes in approved rates must be documented and submitted for review and approval by Service Center Administration.

Accounting/Financial Requirements

• All users within the University must be charged the approved rates for a service center’s services. Service centers are prohibited from charging reduced rates to select users unless such reduced rates are available to all users.
• Users should be invoiced only for actual time used where time-based fees for equipment are involved. The actual time used may include setup/preparation time and cleaning time, if those items were factored into the rate calculation. If users are charged for unused reservation time where no actual equipment was used and/or for scheduled time in excess of actual use time, those charges may only be processed to non-grant funds. Grants may only be charged for actual equipment time, i.e., login to logout elapsed time, together with setup and cleaning time as appropriate.
• All billing rates must not discriminate between federally and non-federally supported users.
• Service center billings must include the full costs, fees charged for the service, and any approved subsidies.
• Any amounts charged to external users in excess of the regular internal University billing rates should be excluded from the computation of a service center’s surplus for purposes of making carry-forward adjustments to future billing rates with the following exception: Service centers with operating deficits must use any external surplus to offset the deficit.
• Services provided to external users may be subject to Unrelated Business Income Tax. Please contact the University Comptroller for additional information as to the application to your center’s situation.
• All sales of tangible goods to external users are subject to Massachusetts Sales Tax unless the purchaser has provided a properly completed Massachusetts Certificate of Exemption from Sales Tax. Questions concerning sales tax should be directed to the University Comptroller.
• All users must be charged for services during the fiscal year the service is rendered (except for the month of June, which services traditionally are invoiced in the next fiscal year). Monthly invoices should be processed and charged via journal entry to the internal BU users. Boston Medical Center and any external users must be invoiced through the Miscellaneous Receivables Department. Any adjustments can be made in the subsequent billing period(s). There should be 12 months of billings posted to the service center account in a fiscal year.
• A discrete cost center must be established in the University’s accounting system to record the actual direct operating costs of the service center, internal service center administrative overhead, revenues from billings and surpluses, or deficits. Documentation to support units of service, billings, and rate calculations must be maintained by the service center.
• Financial, statistical, and other records related to the operations of a service center must be retained for seven years from the end of the fiscal year to which the records relate. Records supporting billing rate computations must be retained for three years from the end of the fiscal year covered by the computations.
• All service centers must submit an annual Financial Report and Summary of Activity on the Annual Service Center Report Form (under development)
• The establishment of charge rates for all new service centers must be reviewed and approved by BU Service Center Administration. The requests for approval must contain the following information:
  • A copy of the business plan approved by the Core Advisory Committee (Medical Campus), including the reason why the services can best be provided by an internal service center rather than by an external service provider.
  • A multiyear budget/business plan including projected costs and utilization of the services.
  • Billing rate calculations with supporting data.
  • Where applicable, a comparison of rates charged by external service providers.

Ordering Service Center Goods and Services

Some core equipment facilities can be scheduled via use of the BU-BUMC Core Equipment Scheduling System. Other facilities can be accessed via the BUWorks system – many centers are listed as Internal Service Providers.

Please refer to the Sourcing and Procurement website for information on how to process internal service requests (ISR).

Closing a Service Center

Service centers may be closed due to a variety of circumstances such as insufficient business volume, obsolete technology, lack of institutional support, programmatic, or other reasons. Whether the closing is requested by the service center director or by other institutional officers, the Service Center Administration Office will coordinate the orderly closing of the service center.

The Service Center Administration Office, in consultation with the school/college or administrative office, will communicate with the Associate Provost for Research as appropriate, and other offices to prepare for the closing. This may include, but is not limited to, developing a plan to complete any work in process, redeployment of personnel, and disposition of capital equipment, supplies, and other assets of the center.

A financial status report of the center will be prepared to determine if there is a deficit or surplus. Outstanding financial obligations and accounts receivable, among other items, will be reviewed and analyzed. If there is a deficit, the account must be brought to zero to be closed within the University’s financial system. If there is a surplus, there will be an analysis performed and a plan prepared of how the surplus will be distributed. This distribution plan will depend upon materiality and if University subsidies are part of the surplus.

Roles and Responsibilities

Service Center/Core Director
The Core Director has the primary responsibility for the development and management of the core’s financial affairs. This includes:

• Accurate estimation of staffing, operating expenses, service volumes
• Completion of rate calculation templates and generation of service delivery rates
• Presentation to the User Committee for review and approval prior to submittal to the Service Center Administration Office for review and approval
• Generating monthly billing
• Annual review of the expenses and income, and adjustment of budgets and suggested rates as appropriate

Service Center Business Administrator
The Service Center Business Administrator assists the Core Director in the business planning process, including rate calculation, 3-year break-even budget, and volume projections. They will:

• Review and submit business plans, budgets, and rate development worksheets
• Ensure service center directors monitor fund balances on a regular basis
• Assist service center directors in financial compliance with federal regulation, applicable sponsor, and institutional policies

Internal Audit
The Office of Internal Audit will periodically select service centers to review for compliance with federal and University policies and procedures.

Core Advisory Committee
The Provost of the Medical Campus has appointed a Core Advisory Committee to review proposals for new core facilities and perform annual reviews of existing service centers located at the Medical Campus.

Core User Committee
Some service centers have appointed users to a committee to provide review and feedback to the Scientific Director on facility use, operations, equipment, and related issues.

Related Policies and References

Uniform Guidance CFR Title 2 Subpart A Chapter II Part 200 Subpart E

Service Center Rate Development Templates and Instructions

Service Center Calculations Template (3 Services)

Service Center Calculations Template (10 Services)

Service Center Calculations Instructions

Service Center Administration Website
Core Laboratories & Facilities Website with BU Service Center Full Listing

History

This manual represents a substantial revision to the “Service Center Policies and Procedures” published in final format in July 1996, was drafted in August 2010, revised in November 2011, and further revised in August 2015 and November 2016.