Administrative Policies

University Policy Number 2112

Subject: Recharge Rates (Interdepartmental Billing)

Responsible Parties: Fiscal Services, Office of Budget and Planning, Office of Sponsored Programs

Procedures: Inventory of Recharge Rates, Recharge Rates Worksheet

Related Policies: University Policy Number 2108 - Direct and Indirect Cost Allocations under OMB Circular A-21

I. SCOPE

This policy applies to all George Mason University organizations, faculty, staff, and students at all George Mason University locations. It is essential that the entire University follow a uniform policy with respect to interdepartmental billing for fees and services.

II. POLICY STATEMENT

A recharge occurs when one University unit provides a good or service to or incurs a cost on behalf of another University unit and seeks to recover its costs. Examples of this activity include campus-wide service providers like Creative Services, Police Security and Human Resources (recruitment advertisements). This policy has been developed to address requesting, reviewing and approving, new or revised recharge rates/interdepartmental fees.

All recharge centers that may bill federal grants or contracts are subject to the cost principles set forth in the federal Office of Management and Budget’s (OMB) Circular A-21, Principles for Determining Costs Applicable to Grants, Contracts, and Other Agreements with Educational Institutions. These guidelines require that the establishment of recharge rates conform to the following standards:

Implementing recharge activity is useful in evaluating the costs incurred to provide major services, emphasizes accountability of the service provider and creates an incentive for service recipients to self-regulate usage.  The Recharge Rate Committee will use these factors to determine whether a recharge rate is warranted or whether the service in question should be considered a normal cost of doing business.

Rate Development

Billing rates are designed to recover the direct operating costs of providing the good or service. No costs other than those incurred to provide the good or service may be included. Rates should exclude unallowable costs and be net of applicable credits, such as discounts for meeting payment terms.

Billing rates must be charged directly to all users. Federally supported activities cannot be charged more than non-federally supported activities. No provision for profit or other increment above cost is allowed by Circular A-21. The Circular allows break-even to be achieved over a long-term basis, if the government and the University agree in advance to a long-term objective.

There are generally three categories of cost that are allocated: a) salaries and benefits of staff to provide the good or service b) supplies and materials associated with the good or service and c) equipment rental or depreciation and maintenance costs associated with equipment used in the process.

Multiple rates should be developed and proposed if separate and distinct goods or services are provided. This practice will prevent the allocation of costs from “losing operations” to other goods or services.

Alternate pricing structures based on time of day, volume discounts, turn-around time, etc. are acceptable, provided that they have a sound allocating basis, do not discriminate among users and do not result in recovering more than the cost of providing the services. Alternate pricing structures will be published so users are able to consider the least costly means to obtain a good or service.

III. DEFINITIONS

Recharge – A financial transaction to charge for a good or service.

Cost Center – A stand-alone activity with identifiable costs. Each cost center generally will have a unique organization code. When exceptions are necessary (e.g., for start-ups), supplemental records must be maintained.

Service Center – An activity that performs specific technical or administrative services, primarily for the internal operations of the University, and charges users for its services. A service center may include more than one cost center. There are three types of service centers, defined as follows:

Recharge Unit – Generally, these are units that establish a clearing organization code to which costs are charged initially, before they are allocated to user/benefiting accounts. This allows the university to accumulate third party vendor costs which are then distributed to various units. Examples include the allocation of purchasing card charges or postage.

Specialized Service Facility (SSF) - Defined by Circular A-21 as an institutional service facility involving the use of highly complex or specialized facilities such as electronic computers, wind tunnels, and reactors.  The University has further defined a SSF as one that meets all of the following criteria:

  • Provides service to a select group of users rather than to overall University operations;
  • Has annual direct operating costs of over $1,000,000; AND
  • Charges at least $250,000 directly to federal awards

Service Unit – All service centers that DO NOT fall within the definition of a recharge unit or specialized service facility. A unit that provides a good or service, and does not just accumulate and distribute costs, to other units and charges a fee to recover the cost of providing the good or service. Most service centers will be service units. Examples include Events Management and Hemlock Overlook.

IV. RESPONSIBILITIES

A. Recharge Units

1. All charges completed from the 16th of one month through the 15th of the following month must be provided to General Accounting as soon as possible after the 15th, but no later than the 25th of the month. Late charges will not be processed without agreement from the units being charged. Disputes over charges will be resolved by the Recharge Committee.

2. Maintain accurate and complete records of operations. Because recharge units are subject to internal and external audit, records must be maintained in accordance with University Policy 1102 – Records Management.

B. Service Units

1. Submit an Initial Recharge Rate Request to establish a recharge rate. Include supporting documentation for the amounts used in the worksheet. If a more complex worksheet is required, the Controller’s Office will assist with development of the worksheet and rates upon request. A narrative justifying the need for a recharge rate should accompany the worksheet.

2. Annually submit a Recharge Rate Worksheet to the Recharge Committee by August 31. The Worksheet should be based on June 30 financial information and will include the rate request for the upcoming fiscal year. A rate request submitted in August 2008 will be for a FY10 rate.

3. If a rate increase is approved, the service unit is expected to notify users/customers of impending changes by November 1 prior to the start of the new fiscal year.

4. Depending on the nature of the goods or service being provided, the service unit may be required to supply cost estimates to the recipient prior to initiating the work, as a condition of approval under this policy. Charges in excess of such cost estimates would not be allowed without prior approval by the recipient.

5. Service units will supply supporting documentation to the recipient at least at the time of submitting a journal entry to General Accounting. All charges for services completed from the 16th of one month through the 15th of the following month must be provided to General Accounting by the 25th of the month. Late charges will not be processed without agreement from the service recipient. Disputes over charges will be resolved by the Recharge Committee.

6. Service units will notify the Recharge Committee if planning to eliminate or decrease a rate at least 30 days prior to implementation. A rationale for why the rate has changed or can be eliminated should be provided. Service unit must also notify users/customers.

7. Maintain accurate and complete records of operations. Because service units are subject to internal and external audit, records should be maintained in accordance with University Policy 1102 – Records Management.

8. Notify the Recharge Committee to inactivate the organization code and terminate the procedure and billing rate when the goods or services are no longer provided.

C. Recharge Committee

1. The Recharge Committee will be composed of the following representatives:                  |

Associate Vice President and Controller   (Chair)           
Associate Vice President, Budget and Planning             
Director of the Office of Sponsored Programs     
A representative from each of the following units:

  • Information Technology Unit
  • Facilities
  • Rotating Unit Representative (to be appointed by the Associate Vice President and Controller) will serve a two-year term

2. Review all initial requests from service centers to establish a recharge rate and annually review all service center Recharge Rate Worksheet submissions (Item B2).

a. Determine if the establishment of a fee or charge to other campus units is the most appropriate response to a situation (e.g. could cost cutting or other revenue enhancements achieve the same purpose).

b. Determine pricing in the marketplace and set rates at a competitive level; if rates increase beyond market rates, outsourcing should be a consideration.

c.Review for completeness, accuracy, and conformance with Circular A-21 format and budgetary requirements.

d. Determine the impact on the State Council of Higher Education for Virginia (SCHEV) Auxiliary Indirect Cost Recovery study, compliance with Cost Accounting Standards (CAS) and the terms and conditions of sponsored agreements, and whether proposed rates require negotiations with the cognizant federal agency.

e. On request, will give service centers advice about the regulations in Circular A-21, CAS and contract and grant terms and conditions.

f. Determine the need for budget adjustments if the rate proposal is approved (e.g. allocation of budget from the service unit to the recipient units).

3. Notify service center of rate proposal’s approval or rejection within 45 days of receipt of an initial request and 90 days of request to increase rates. Notify General Accounting of approved new rate or revised rate. Notify the Office of Budget and Planning of the rate inventory for the upcoming fiscal year by March 1.

4. Resolve disputes over Service Center charges.

5. Meetings will be called by the Chair as needed.


D. Specialized Service Facilities

1. When directed by the Controller’s Office and the Office of Sponsored Projects, this type of center will begin bearing its allocable share of University-wide facilities and administrative (F&A) costs. This means a separate F&A rate may need to be negotiated with the government for each SSF. The rate will be applied to all users of the facility.

E. General Accounting

1. Process all JVs in a timely manner. All activity received from the service units by the 25th of the month will be posted in that month.

V. COMPLIANCE

Failure to comply with federal regulations, circulars, and cost accounting standards may result in repayment of disallowed costs, and assessment of fines, penalties, and interest by the federal government.

VI. EFFECTIVE DATE AND APPROVAL

This policy is effective July 1, 2008, and shall be reviewed and revised, if necessary, annually, with changes to become effective at the beginning of the university's fiscal year, unless otherwise noted.

_______________________
Maurice W. Scherrens
Senior Vice President

________________________
Peter N. Stearns
Provost

Date Approved: June 25, 2008