Carolyn Ainslie, vice president for finance and treasurer
Roberta Newmeyer, costing policy and analysis manager, (609) 258‐3964
I. Policy StatementBACK TO TOP
Princeton University has academic departmental units that provide goods and/or services to other departmental units and charge for those goods/services. These are referred to as Recharge Centers and may include services such as departmental computing facilities, clean rooms, machine shops, special purpose equipment, and the like.
The purpose of this policy is to ensure compliance with Federal government regulations (Circular A-21) and consistent standards when charging government grants and other users for departmental services. The rate used to recover the expenses of running a Recharge Center must be calculated in such a way as to recover only costs that are allowable under OMB Circular A-21. Circular A-21 does not allow a profit to be included in the rate. Moreover, all users must be charged or accounted for at the same basic rate, although it is possible to charge users outside the University a surcharge. However, there could be tax implications if the surcharge were to result in a profit. For this reason, all proposals for surcharges should be reviewed by the Budget Office in conjunction with the Tax Director.
II. Who is Affected by this PolicyBACK TO TOP
This policy applies to all federally-funded sponsored projects and programs, including federal prime subawards received by the University through another entity. It also applies to all recharge centers regardless of the level of usage by federal sponsored awards. It should be understood by all University employees responsible for accounting transactions, including Principal Investigators (PIs), Grant Managers, Department Managers, staff within Sponsored Research Accounting (SRA), and staff within the Office of Research and Project Administration (ORPA).
IV. PolicyBACK TO TOP
Accounting for Recharge Centers must be treated separately from other department efforts and must allow for easily identifying revenue and expense, as well as any surplus/deficit. The Budget Office will help in setting up new project grants required for these purposes.
Costs must be allowable under Circular A-21. To be allowable they must be reasonable, be incurred either solely to benefit the service provided by the Recharge Center or proportionally allocated to the Recharge Center based on reasonable allocation methods, and be treated consistently by the institution. In addition, A-21 specifies certain costs as unallowable (e.g., entertainment). Details are discussed below.
Departments must budget allowable costs on an annual basis, as well as projecting usage to arrive at a rate that will break even over a reasonable period of time. Variances must be rolled into the following year’s calculation of a new rate. Deficits may be covered from departmental discretionary funds with the approval of the Budget Office.
The rate must be approved by the Budget Office each fiscal year. Proposed rates should be submitted no later than June 1st of the preceding fiscal year.
Circular A-21 Requirements:
As mentioned above, Circular A-21 governs the cost principles used when charging government sponsored research grants. Section J.47 provides the general statement regarding costs of such recharge center services based on actual usage and an established charging methodology.
1) Internal & External Users: Although service/recharge centers primarily serve internal users (those whose ultimate source of funds is within Princeton), external users may exist as well. External users are non-University entities that are purchasers of departmental goods/services. The users are charged directly for actual use of services at a pre-approved rate. Charges to internal users may not recover more than the aggregate cost of the service.
2) Establishing Break Even Rates: Rates are designed to match revenue and expense without resulting in a profit or loss. Departments may choose to subsidize recharge centers, but all use must be accounted for at the full approved rates. Special rates, such as for high volume work, are allowed, but they must be equally available to all users who meet the criteria. Rates may not be based on historical or market rates. Break-even rates may include costs for:
- Direct Personnel – salaries and wages of all personnel directly related to service center activity. If the individual works on more than one activity, costs should be allocated proportionally to each activity.
- Administrative Staff – salaries and wages of administrative staff dedicated to supporting or managing the service center. If there are administrative tasks that benefit more than one service center activity, costs should be allocated proportionally to each activity. However, departmental administrative staff who administer the Recharge Center as well as perform other departmental duties should generally not be allocated unless a substantial amount of time is spent on the recharge center.
- Fringe Benefits – Fringe benefits related to personnel costs that are directly charged to the service center should be included in the rate calculation.
- Materials and Supplies – Costs of materials and supplies necessary to operate a service center, but only the materials and supplies actually used, not those stored in inventory.
- Capital Equipment Depreciation Expense – Capital equipment includes items purchased with a cost of $5,000 or more and a useful life of more than one year. Federal guidelines allow the rate to recover the depreciation expense - historical cost of that equipment over its useful life.
- Miscellaneous Expenses – Rental and service contracts, equipment operating leases, and professional services utilized by the service centers should be included in the rate calculation.
They may not include:
- Unallowable Costs – The costs that have been designated as unallowable for government grant accounting may not be included in the calculation of rates for services since those services may be charged to a government grant or contract. Please see the “ADDITIONAL UNALLOWABLE EXPENSES – FEDERAL FUNDS” section of the Business Expense Policy.
- Cost sharing – Any costs formally committed as cost sharing to any Federal sponsored project cannot be recovered through the Recharge Center rate.
3) Pricing of Multiple Services: When a service/recharge center provides different types of services to different users, separate billing rates should be established for each service that represents a significant activity within the service center. The costs, revenues, surpluses, and deficits should also be separately identified for each service. The yearly surplus or deficit (normally within +/- 10%) guideline should be considered for each service.
4) Rate Approval: The department must receive approval from the Budget Office for any service/recharge center rate.
- Rates must be approved annually, regardless of whether there are projected changes from the previous year. Proposed rates for the budget year beginning July 1 should be submitted to the Budget Office no later than the previous June 1.
- Significant changes in the budget from year to year or significant differences between the budget and actual should be explained in detail.
- If external users will be charged a different rate from internal users, then external usage must be identified separately in the rate calculation.
5) Surplus/Deficit Policy: Since billing rates are calculated based on estimated costs and estimated units of usage it is not expected that income and expenses will net to zero in any one year. Billing rates should be designed to break even over a reasonable period of time, not to exceed 3 years. As a general guideline, surplus/deficit balances should fall within 10% of expenses. Surplus/deficit balances are normally rolled into future years’ rates. In no case may a surplus be transferred to another project/grant.
6) Accounting and Record-keeping: Separate project/grants or department numbers should be established in the University’s accounting system to record the actual direct operating costs of the service/recharge center, overhead where applicable, revenues from billings, and surpluses/deficits. Documentation to support billings and rate calculations, as well as documentation supporting the billing methodology, should also be maintained. It is the service/recharge center’s responsibility to maintain detailed records of all charges and answer inquiries in reference to those charges. Records should be retained for seven years.
V. Procedures BACK TO TOP
VI. Forms BACK TO TOP
VII. Contact Roles and Responsibilities BACK TO TOP
VIII. Update Log BACK TO TOP
No changes. Copied to web-based policy library.