Medical University of South Carolina
Recharge Centers Policies and Procedures
Table of Contents
These policies and procedures provide a framework for the fiscal operations of recharge
centers functioning under the auspices of the Medical University of South Carolina to
ensure compliance with federal cost principles, consistency in accounting and costing
practices, and flexibility to meet the needs of different operations. These guidelines
address those practices and provide examples of billing rate structures and the steps
involved in building such rates.
The University must comply with the Federal Government's Office of Management and
Budget (OMB) Circular A-21, Cost Principles for Educational Institutions, and Cost
Accounting Standards, as it pertains to service centers in section J. 44. Compliance with
A-21 is implicit in this guideline.
The University's exposure from noncompliance with federal regulations may involve
reimbursement to the government as well as adverse publicity which could harm future award
applications. The purpose of this guideline is to provide guidance to recharge centers
regarding rate development and center management to ensure nondiscriminatory charging of
materials or services.
2.0 Recharge Center Definition
1) Resides within an academic department
a) Below cut-off for
service center ($25,000 in revenue),
b) Small number of
c) Normally materials
or services, but not both.
3) Operating costs are supported by recharges to the departments or specific activity
receiving the service.
4) Recharge center rates are developed based on incurred costs and will therefore produce
a break-even cash flow over time.
1) Should be registered centrally,
2) Charge out method should be approved centrally, but annual approval of rates is
3.0 Rate Components
3.1 Direct Personnel
1) The salary, wages, and fringe benefits of all personnel directly related to recharge
center activity should be included in the rate calculation and charged to the recharge
center's operating account. If an individual works on more than one activity, the costs
associated with that individual should allocated to the activities based on the
proportional benefit. This proportional benefit may be determined by effort
reporting, a periodic time sheet, or by a time study.
2) Recharge Center Director: The salary and fringe benefits of the director should be
charged to the recharge center's operating account commensurate to the
effort provided for the administration and management of the center to ensure quality
control and scientific integrity.
3.2 Administrative Staff
The salary, wages, and fringe benefits of administrative staff in direct support or
management of a recharge center should be included in the rate calculation and
charged to the recharge center's operating account. Administration costs benefiting more
than one activity should be allocated to the benefiting services on a reasonable basis.
3.3 Materials and Supplies
The costs of materials and supplies needed to operate a recharge center should be included
in the rate calculation. If inventory is accumulated in a particular year, the recharge
center should not include the costs of accumulated inventory in its rates. The recharge
center may maintain significant inventory in a separate inventory UDAK.
3.4 Other Expenses
Other operating expenses to be included in recharge center rates are rental and service
contracts, equipment operating leases, and professional services.
3.5 Capital Equipment and Assets
1) Basic Guidelines:
Capital equipment (See MUSC Policy on Capitalization and Depreciation of Property, Plant,
and Equipment) and capital leases include items with a purchase price over $5,000
(effective March 25, 1999). Capital equipment for recharge centers may be provided from
various sources such as departmental funds and federal or other grants. Federal guidelines
do not allow for recovery of the purchase cost of capital equipment or the depreciation
expense made by federal funds through recharge center rates; however, the federal
guidelines do allow for recovery of depreciation associated with capital equipment
purchased by non-federal funds.
Additionally, it is critical to identify capital equipment utilized by a recharge center
in order to avoid recovery of depreciation or purchase cost through both direct charges to
federal grants and through the indirect cost recovery charged to federal grants. This
identification should be recorded in the University's Fixed Asset System.
Annual depreciation on the non-federally purchased equipment (inclusive of mandatory cost
sharing) will be calculated on a straight-line basis using the useful life as determined
by the Fixed Assets Accounting Department of MUSC Finance and will be utilized in the
recharge rate development for the year. The depreciation cost for the year will be charged
to the recharge center operating account at a minimum on a quarterly basis and preferably
on a monthly basis.
3) Federally Funded Equipment Purchases:
It should be noted that if the equipment was purchased through an active federal grant or
award, any recovery or revenue may need to be applied as program revenue to the grant
account. Please contact the MUSC Office of Research and Sponsored Programs.
4) Donated Equipment:
If a department has donated equipment to support a recharge center in exchange for an
offset for a discounted rate for departmental use of the facility, the depreciation of the
donated equipment should the included in the annual depreciation cost. The rate
calculation should be made including and excluding the annual depreciation expense of the
donated equipment. The donating department is then charged the rate excluding the
depreciation expense and the deprecation expense charged to the recharge center's
operating account is reduced based on the department's activity. For example:
Rate with donated equipment = $5.00 per sample
Rate without donated equipment = $4.75 per sample
When the donating department is charged for services, the charge would be calculated
and posted as follows:
|Depreciation Expense - Donated Equipment
(1) Amount expensed by receiving department; for example, 22020A000 5020X.
At year end, the Depreciation Expense - Donated Equipment will be used to adjust the
Depreciation Expense charged to the recharge center's operating account and collected
by the recharge center's plant asset account.
It should be noted that the donated equipment should be identified with the recharge
center on the University's Fixed Assets records in order to avoid inclusion in the
depreciation of general purpose equipment in the University's Facilities and
Administrative (indirect) cost rate.
3.6 Operation & Maintenance and Utility Costs
Recharge centers may or may not be required to recover these costs based on University
policy. Determination will be made during annual review of recharge center activity by
Grants and Contracts Accounting. See Item 2.2. Above. If the costs are not
included in the recharge center rates, the University will recover the costs through the
Facilities and Administration (indirect) cost rate.
3.7 Unallowable Costs
Unallowable costs must be excluded from the internal user rate calculation. These costs
include: bad debt expense, interest, alcohol, and many advertising activities. A complete
listing of unallowable costs from OMB Circular A-21 (Section J) may be obtained directly
from the OMB Website http://www.whitehouse.gov/WH/EOP/omb.
4.0 Rate Development
4.1 Basic Philosophy to Meet Federal Regulations
1) Surpluses and Deficits:
A recharge center must develop rates so that revenues offset expenses over a reasonable
period of time. A recharge center's surplus or deficit for a given fiscal year should not
exceed 10% of annual operating expenses. To the extent that a surplus or deficit is within
the break-even range of plus (+) or minus (-) 10%, that surplus or deficit must be carried
forward and the rates adjusted in the following period. A mid year-review should
be performed and any adjustments made to the rate as required to ensure the 10% threshold
is not exceeded at year end. Otherwise, the Federal regulations specify a
reimbursement to Federal grants and awards on the excess charged.
2) Working Capital:
In addition to full recovery of actual costs, recharge centers may establish and
maintain through its charges a fund balance for working capital needs. The surplus fund
balance should not exceed 60 days working capital excluding depreciation/use allowance.
Recharge centers which have accumulated surplus funds through billing to internal users
may not transfer these funds out of the recharge center operating account. The balance
must be carried forward and used to adjust subsequent billing rates.
4) Multiple Services:
A recharge center providing more than one service may sometimes make a surplus on some
services and a loss on others. Recharge centers must ensure that there is no
cross-subsidization between user groups. Combining the results of various services is not
acceptable if the mix of users of each service is different.
4.2 Recharge Center Rate
This rate is the cost per unit of output used to recover the expense of the recharge
center using the following equation:
Budgeted Expenses +/- Prior Year Under/Over Recoveries (within +/-
Budget Usage Base
4.3 Budget Usage Base
This is the volume of work expected to be performed, expressed in units (e.g., units of
output, labor hours, machine hours, CPU time, or any other reasonable measurement). This
rate, based on budgeted activity, is applied to the actual activity when charging users.
Ex: A recharge center costs approximately $50,000 to operate per year excluding
unallowable costs and including depreciation expense. The estimated units of machine hours
for the year is 800 hours. The rate per hour = $50,000/800 = $62.50.
For the processing of one unit, 25 machine hours are consumed for a charge of
4.4 Nondiscriminatory Rates
A recharge center must charge all internal users at the same rate for the same level of
services or products purchased in the same circumstances. Rates should not differentiate
among internal users. The use of special rates such as for high volume users or less
demanding non-scientific applications are allowed but they must be equally available to
all users who meet the criteria. See section 4.7 below.
External users may be charged a higher rate than that charged to internal users;
however, revenues and costs associated with external users should be tracked separately to
avoid the perception of overcharging. This can be accomplished by recording externally
generated revenue as Sales & Services Revenue (43062) as opposed to IntraInstitutional
Revenue (406XX) codes.
The calculation of a rate for external users should include costs associated with
Facilities and Administrative (indirect) cost components such as Operations &
Maintenance of Plant, Building Depreciation, General Administration, and Departmental
4.5 Subsidized Users
All users must be billed for services received. If the University chooses to provide a
service to a particular internal group of users (such as faculty who require audio visual
services as part of an instructional program) at no charge or at a lower rate than other
users, the recharge center billing rate must be calculated for all internal users based on
total recharge center expenses and total units of output. The services used by the
subsidized user group must be billed out at the full rate, but the amount representing the
subsidy should be billed to an account representing the appropriate direct cost activity
(For example, instructional budget). The recharge center must ensure that the rate
charged to this user group is consistent with that charged to others, including accounts
ultimately charged to federal awards. For example, for service costing $5.00 subsidized at
||Expense Account Number
||Dept'al Instruction (2)
||Expense Account Number
(1) Amount of revenue posted to recharge center with account number 40620 or 40630
(2) Account designated by the department for these types of differentials.
4.6 General University Subsidy
If the University chooses to provide a general subsidy to offset the costs of the recharge
center, this subsidy should be posted to a revenue object code designated "University
Subsidy Transfer." The estimated subsidy for the year in which the rates will be used
should be deducted from the allowable costs used in Item 4.2. of this guideline; i.e.,
Budgeted Expenses - Planned Subsidy +/- Prior Year Under/Over Recoveries (within +/- 10%).
Rates for external users would be calculated without the adjustment for the General
University Subsidy. See Item 4.4 above.
4.7 Discounted Rates
Discounted rates are only allowable if there exists an exchange of resources or other
consideration (e.g., a departmental subsidy) which provides a definitive rational for
providing the discount. Letter Agreements should be executed to clearly delineate the
reason and methodology of the discount. This letter agreement must be signed by the
Department Chair and copied to the Director of Grants and Contracts Accounting in order to
be valid. Invoices should reflect the discounted amount and be posted to accounts (expense
codes) which correspond:
|Discount for dept'al subsidy
(1) IntraInstitutional Revenues - Services
An alternative accounting of this discount would include posting the Services Provided
of $5.00 to IntraInstitutional Revenue (406XX) and the discount for the subsidy of $0.25
to a contra-revenue account in a manner similar to the Equipment Discount in Item 3.5)d of
5.0 Internal Control & Responsibilities
Rates will be calculated annually by the Business Manager of each recharge center, and
submitted for review to the Director of Grants and Contracts Accounting.
The Director of Grants and Contracts Accounting will be responsible for reviewing the
rates and ensuring compliance with this guideline.
The Director of Grants and Contracts Accounting will be responsible for training and
overall monitoring of recharge centers.
5.2 Mid-year Review
Recharge Center Managers should evaluate their financial position and rates periodically
throughout the year to assess their position with respect to break-even. Under special
circumstances, rates will be adjusted through a mid-year reduction/increase in rates
provided that midyear rate adjustments are subject to review by the Business Managers and
the Office of Grants and Contracts Accounting. Mid-year rate adjustments will be treated
as exceptions. For example, when a budget of greater than plus or minus 10% is
5.3 Year-End Rate Performance Review
At fiscal year end, all recharge centers will be required to submit their actual financial
5.4 Establishing Recharge Center UDAKs
All recharge centers must maintain a UDAK for operating purposes and plant purposes as
appropriate. The Business Manager is responsible for ensuring that all recharge centers
have established a separate UDAK. Likewise, the establishment of new recharge center UDAKs
should be reviewed by the Business Managers for desirability, feasibility, and to ensure
they will operate in accordance with the University's policy manual.
5.5 Billing Procedures and Record Retention
Billings must be based upon measured and documented utilization which is properly
authorized for the account charged. All billings should be processed on a timely basis and
will be at established recharge center rates. The support for the charges, including
documentation of expense and usage, should be retained by the recharge center for seven
years to answer any user inquiries or in case of an audit. All invoices must provide the
1) the nature of the services rendered (e.g., photocopying)
2) the number of units (e.g., pounds, hours, # of items)
3) amount charged per unit
4) extended total
A service should not be billed for until the service has been rendered; that is,
prepayments are not appropriate. Each recharge center must operate in accordance with the
University's fiscal year. Recharge centers should handle each year-end billing
consistently, to ensure that twelve months of cost recovery are associated with twelve
months of incurred cost, and thereby provide a more accurate break-even calculation at
5.6 Billing External Users
At a minimum, external users will be charged for the full direct costs of the recharge
center operation. An allocable share of the University's Facilities and Administrative
(indirect) cost to the recharge center operation may be charged to external users. At no
time will an external customer be charged less than the federal government and internal
users for the same service. The federal government will always be treated as the most
favored customer. Sales tax, when applicable, must be charged to all external users who do
not provide their tax exempt certificates. See Item 4.4, Nondiscriminatory Rates.
5.7 Credits to Expenditure Accounts
Credits to expenditure accounts are normally used to record amounts received for returned
goods and other expense-related adjustments. Recharge center revenues should not be
recorded as credits to expenditure accounts. Such treatment would misstate both revenues
and expenses and offset the calculation of recharge center rates in the following periods.
Recharge Centers Working Group
Howard Lundy - Team Coordinator
For further inquiries or comments, please contact our Web