Service Centers

The service center billing rate is the cost per unit of measure (UOM) used to recover the costs of the service center. New service center billing rates and changes to existing rates are calculated with guidance from Financial Management and approved by:

• Financial Management.
• Service Center Manager.
• Department Head or Chair.
• Unit Business Officer (UBO).
• University Controller.
• Provost Designee, as applicable.

Service center billing rates must be calculated and reviewed based on the university’s fiscal year. Rates must be reviewed and adjusted at least biennially.

All service centers must comply with the Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 C.F.R. 200) (Uniform Guidance). Key requirements of the Uniform Guidance include:

a) The costs of services provided by highly complex or specialized facilities operated by the non-federal entity (e.g., computing facilities, wind tunnels, reactors) are allowable, provided the charges for the services meet the conditions of either (b) or (c) below, and, in addition, take into account any items of income or federal financing that qualify as applicable credits under §200.406.

b) The costs of such services, when material, must be charged directly to applicable awards based on actual usage of the services based on a schedule of rates or established methodology that:

1. Does not discriminate between activities under federal awards and other activities of the non-federal entity, including usage by the non-federal entity for internal purposes, and
2. Is designed to recover only the aggregate costs of the services. The costs of each service must consist normally of both its direct costs and its allocable share of all indirect (Finance & Administrative (F&A)) costs. Rates must be adjusted at least biennially and must take into consideration over/under-applied costs of the previous period(s).

c) Where the costs incurred for a service are not material, they may be allocated as indirect (F&A) costs.

d) Under some extraordinary circumstances, where it is in the best interest of the federal government and the non-federal entity to establish alternative costing arrangements, such arrangements may be worked out with the federal cognizant agency for indirect costs. 

With guidance from Financial Management, service centers must first calculate a service center base rate for each service based on allowable rate components.

Service Center Base Rate = Budgeted Costs / Budgeted Unit of Measure (UOM)

Budgeted costs are based on prior year costs or an estimate of the upcoming year’s costs. New service center billing rates must be based on a reasonable estimate of the costs to provide the services for the year and the projected volume for the year.

UOM is the volume of work expected to be performed (e.g., labor hours, machine hours, CPU time, or other reasonable measurement). This volume of work must be based on the total annual UOMs, regardless of whether the user is charged. This is necessary to avoid having some users pay higher rates to compensate for reduced rates charged to other users.

Once the service center base rate is calculated, service centers may set variable billing rates, based on the customer types.

Internal Rate = (Cost - Subsidies):

• The internal rate is billed to internal users; internal users include academic, research, administrative, and auxiliary units whose originating source of funds is within or flows through the university. The originating source includes State, RF, UBF, and Faculty Student Association (FSA) funds.
• The same internal rate must be charged to all internal university users. Multiple internal rates can be established if these alternate pricing structures (e.g., based on time-of-day, volume discounts, turn-around time, and department affiliation) have a sound management basis, do not discriminate among users, and do not result in recovering more than the cost of providing the services. All internal rates must be recorded to ensure that they are not inappropriately charged to other users.
• Internal rates are based on the service center base rate (cost), less any approved subsidies.

Internal Rate + GUSF = (Internal Rate + GUSF): 

• The internal rate + GUSF is billed to students who are using the center for academic or research and are paying with funds that come from outside the university.
• Internal + GUSF rates are based on the internal rate, plus the General University Service Fee (GUSF).

External Rate = (Cost + GUSF + Markup): 

• The external rate is billed to external users; external users are individuals or organizations whose originating source of funds is outside the university. External users include faculty and staff acting in a personal capacity. Affiliated hospitals and other universities are external users unless the university has subcontracted with them as part of a grant or contract, in which case they are internal users.
• Multiple external rates can be established if these alternate pricing structures have a sound management basis, are measurable and do not discriminate among users. Examples of acceptable external rates include external academic, external non-profit, and external industry.
• External rates are based on the service center base rate (cost), plus GUSF and any approved markups. Markups must be justified based on going market rates for similar services.
• External rates may be subject to sales tax and Unrelated Business Income Tax (UBIT).
  

The OMB Uniform Guidance includes a list of considerations for selected items of cost. The list is not all-inclusive and failure to mention a particular item of cost is not intended to imply that it is either allowable or unallowable. Unallowable costs must be excluded from service center billing rates.

The following list contains some of the costs that have been specifically identified in OMB’s Uniform Guidance as unallowable:

Service centers must develop billing rates so that revenues offset costs over a reasonable period of time.

With proper approval, operations may be subsidized, if the center is meeting its research or educational mission to serve the University. When billing rates are lower than cost, the resulting deficit cannot be carried forward as an adjustment to future billing rates. Amounts charged to external users in excess of the internal service center billing rate must be excluded when calculating the service center surplus or deficit.

Internal university customers must be charged at cost for services provided. 

Service centers must bill all customers for all services provided. With proper approval, the service center may choose to provide a service to an internal group of customers at no charge or at a lower rate than other customers, however, the service center billing rate must be calculated for all internal customers based on total service center expenses and total units of output. Variable rates must be based on clear and identifiable criteria.

Services centers are permitted to charge external customers a rate higher than the rate charged to internal customers. Service centers are required to track revenues and costs associated with external customers separately to avoid the perception of overcharging.

Rates charged to external customers may include:

• Full direct costs of the service center operation including direct costs not charged to internal users.
• Indirect (F&A) costs of the service center operation.
• General University Service Fee (GUSF).
• Sales tax, where applicable.

External rates cannot be significantly different than the prevailing rate for identical services provided by commercial organizations in the area.

Revenue from external customers may have Unrelated Business Income Tax (UBIT) implications.

During the rate development process, Financial Management will provide an annualized break-even pro-forma and will assist with reviewing the break-even analysis annually. 

Service centers must establish a separate account(s) to record only service center revenue and expenditures to provide transparency and an audit trail for tracking and performance. All service center accounts must roll up to a service center entity.

An Income Fund Reimbursable (IFR) account(s) should be established to record service center activity. A Research Foundation (RF) service and facility account, and/or University at Buffalo Foundation (UBF) service account may be established to record service center activity with prior approval from Financial Management and the University Controller.

Funds recovered by depreciation included in the service center billing rate must be set aside in a separate account as an equipment replacement reserve to fund the purchase of new equipment.

At a minimum, service centers must have at least one account for tracking revenue and expenditures and that account must be assigned to the service center’s entity. If a service center has funding from multiple funding sources (i.e., payroll in state operating; revenue and expenditures in state IFR; payroll or endowment funding in UBF), all accounts related to the service center entity must be assigned to the service center entity. 

Financial Management recommends creating a series of sub-accounts (IFR) or tasks (RF) to track revenues and expenditures. This will help centers when they are reviewing their rates.

Service centers may choose to create one sub-account or task for each instrument or service provided. The benefit of this approach is that centers can quickly identify the instruments or services that are generating a margin, breaking even, or need to be subsidized. Financial Management can also quickly run reporting on the expenses that are related to each instrument or service when helping the center calculate updated billing rates.

Service centers may choose to deposit the revenue directly into each of the sub-accounts or tasks, or they may choose to deposit all revenue into one sub-account or task and then reconcile the accounts regularly. The benefit of using one sub-account or task for revenue centers can provide one payment link to external customers and can also easily reconcile when payments are received. 

Centers that receive funding to subsidize operations should create a sub-account or task for that funding.

If a center has multiple funding sources, they may elect to create a series of accounts based on the expenditure type and how it is funded.

Funds recovered by depreciation included in the service center billing rate must be set aside in a separate account as an equipment replacement reserve to fund the purchase of new equipment. At the request of the service center manager, Financial Management will establish an account to accumulate depreciation dollars. Centers may choose to create a completely separate account number or for the Research Foundation, they may choose to create a separate project or task under the center’s main award. 

Service centers that provide services to external customers must establish Service Center Agreements. A university member may not sign or otherwise execute a procurement contract binding the university unless they are delegated a signature authority in accordance with the Approval Authority Policy. Refer to the Service Center Procedures to request a contract.

Service Centers approved to collect funds through State Income Fund Reimbursable (IFR) Accounts can request Service Center Agreements via ShopBlue.

Service Centers approved to collect funds through Research Foundation Service and Facility Accounts can request Service Center Agreements via Click.

Billing must be based upon measured and documented utilization using approved billings rates and processed on a timely basis. An invoice must not be issued until the service has been rendered or the materials provided (pre-billing is not allowed).

Invoicing and accounts receivable tracking must be managed through university-approved systems.

Revenue collection must be processed through a university-approved method.

Billing must be based upon measured and documented utilization using approved billings rates and processed on a timely basis.

• Invoices must be based on documented and properly approved rates.
• All invoicing must be processed on a timely basis (i.e., within one month from the time of service) and with approved service center billing rates.
• An invoice must not be issued until the service has been rendered or the materials provided (pre-billing is not allowed).
• Invoices must include the following information:
  • Name and account number of the service center.
  • Invoice number or another unique identifier.
  • Date of service or sale.
  • Nature of the services rendered or number of units sold (must match approved price list).
  • Related unit charged and extension to show total cost per line of time.
• The service center is responsible for monitoring collections on accounts receivable.
  

Depending on the service center’s funding source and the customer’s funding source, there are different processes for invoicing and collecting payments. 

The university is currently implementing a newly procured system: BLUE SERVICES, powered by iLabs. This tool will revolutionize how our service center managers and staff handle equipment reservations, billing, reconciliation, inventory management and more.

Service centers receiving payments must ensure that appropriate segregation of duties is maintained to safeguard funds and the university’s reputation as required by the Safeguarding Cash and Cash Equivalents Policy.

When staffing resources make segregation of duties difficult, compensating controls must be implemented to provide the appropriate checks and balances to detect errors, deter fraud, and prevent the concealment of irregularities.

Service centers must have standard operating procedures on file. 

Service centers must have Standard Operating Procedures on file, outlining who is responsible for each task in the center. Financial Management can assist centers with templates that outline these procedures. 

The service center manager must maintain rate development documentation. Documentation includes the actual costs of providing the service, units of service provided, billings, collections, and the annual surplus or deficit.

In accordance with the Uniform Guidance, original rate development documents must be retained for three years from the end of the fiscal year covered by the calculations. These documents are subject to external audit (e.g., federal, state, Research Foundation and other sponsors) and internal review.

Service center managers should work with their departments to store documentation. 

Service centers that stock inventory must perform an annual physical inventory and reconcile to the inventory records. Inventory valuation must be submitted to Financial Management.

Service center managers should work with their departments to store documentation. 

Inventories are defined as the aggregate of those items of tangible personal property which are held for sale in the normal course of business (e.g., supplies), or are to be consumed within one year in the production of a service (e.g., fuel).  Some examples of inventory components include hospital pharmaceuticals and supplies; central, maintenance, mechanical and electrical stores; fuel, diesel, and coal; office and computer supplies; lumber; fabric; hand tools; and postage.

Annual physical inventory counts must be based on physical counts performed as of June 30. Service center staff must manually count all supplies and reconcile these numbers against the system inventory. Large variances must be investigated.

The value of inventory is determined by a physical count on a specific date and is recorded by valuing the actual inventory count in accordance with the inventory method used (e.g., FIFO, LIFO, weighted average, specific identification).

The FIFO (first-in, first-out) method of valuing inventory is illustrated below and is the preferred method.  This method of recording inventories is based on the assumption that costs should be charged against revenue in the order in which they occurred. The inventory remaining on hand is presumed to consist of the most recent costs. The first goods acquired are the first goods out, and the last goods acquired are in the ending inventory.

Ending Inventory per physical count is 14,000 units.

Inventory Valuation is $77,000.