.010 General Information
.020 Definitions
.050 By-Product Sales
.060 Schedule of Charges
.070 Establishing Billing Rates for Schedule of Charges
.080 Checklist for Schedule of Charges
.090 Questions
Forms:
.110 Sample Form - Schedule of Charges
.120 Sample Form - Schedule of Charges Justification
Kansas State University produces or makes available a wide variety of products and services to the University community and the sale of these can be classified into two operating categories:
- Service Clearing Activities
- Recharge and Service Centers
All activities, no matter how small, must have a price that can be substantiated, have a breakeven pricing schedule, abide by policies governing unfair competition, and be reviewed and updated on a regular basis. In addition, all federal and non-federal sponsored agreements must receive the lowest rate available, as specified in OMB Circular A-21, Section J.44.
Any sale of products or services by a Regents institution, its auxiliary enterprises, or an affiliated corporation of a Regents institution (all hereinafter collectively referred to as "institution (s)") is deemed appropriate only if such sale is an integral part of, or reasonably related to, an activity which is essential to the fulfillment of the institution's instructional, research or public service missions. (Board of Regents Policy on Sales of Products and Services, PPM 6080.)
Breakeven Concept- Rates are generally calculated based on budgeted projections of operating expenses and projected volume of the services or products to be provided during the fiscal year. The goal of operating at "breakeven" is to calculate a rate that will ensure revenues reasonably offset expenses with no significant profit or loss resulting.
By-Product- A product which results in the course of the University conducting research or providing instruction or public service.
Depreciation- A charge to current operations which distributes the cost of a capital asset, less the estimated salvage value, over the useful life of that asset in a systematic and logical manner. Depreciation will be calculated using the straight-line method, which means the cost will be distributed evenly throughout the useful life of the asset. (We recommend using MACRS property classes to establish the useful life of an asset. This can be found in IRS Publication 946.)
Internal Customer- A
Kansas Board of Regents institution or any organization or individual that
reports to the State of Kansas. Internal customers include KSU departments
and other State Agencies.
External Customer-
Any organization or individual that does not report to the State of Kansas and
any educational institution, other than a Kansas Board of Regents institution.
External customers include, but are not limited to, students, members of the
faculty or staff acting in a personal capacity, community colleges, school
districts and members of the community.
Recharge/Service Center- An operating unit that is in existence to conduct research or provide public services for University departments or the University community. Services or products may be provided to external customers on an incidental basis.
Service Clearing Unit- An operating unit set up to provide services exclusively to University departments and has been specifically designated by the Legislature as a service clearing unit.
In accordance with K.S.A. 76-755, Service Clearing funds shall be used only as a working capital fund to finance the internal service activities rendered to Kansas State University's own departments, other institutional related organizations and specific organizations and classes of individuals approved. These activities are specified in appropriations acts for the service clearing fund or are authorized for the service clearing fund by the Kansas Board of Regents with the approval of the state finance council acting on this matter, which is hereby characterized as a matter of legislative delegation and subject to the guidelines prescribed in subsection (c) of K.S.A. 75-7311c and amendments hereto.
The service clearing fund shall be used for the following specific University departments:
| 09020 | K-State Printing Services |
| 09030 | Photographic Services |
| 09080 | KSU Supplies Store |
| 30112 | Telecommunications Service Clearing |
| 60030 | Facilities Car Pool |
| 60040 | Facilities Garage |
| 60050 | Facilities Services Service Clearing |
| 60060 | Facilities Storeroom |
| 60110 | Postage |
| 65012 | Facilities Planning Service Clearing |
| 70013 | Public Safety Service Clearing |
Services are to be provided to Kansas State University departments and other institutional related organizations only. Non-University organizations or individuals (see the definition of External Customer) requesting services from a service clearing unit are to submit a written request to the unit, describing the reason for the service. The service clearing unit will forward the request to the University Controller's Office with their recommendations or comments. If approved, the service clearing unit will be notified and service can then be provided.
The service clearing departments must have a full cost recovery pricing schedule established following the breakeven concept. This is accomplished by (1) balancing the accounts at the end of each fiscal year, and (2) analyzing the rates on a fiscal year basis and adjusting them to account for any operating surplus or deficit. In addition, Legislation requires that these fees be used solely for the specific purposes or programs elected and that these activities cannot be subsidized through state funds. Consequently, each department must develop and publish a policy statement that includes how fees are structured and state that the rates for service clearing departments will be audited and updated annually to ensure the breakeven concept. A copy of this policy and an updated annual rate schedule must be attached to a Schedule of Charges form and forwarded to the Controller's Office.
Rates for service clearing departments will be based on the budgeted non-state funded salaries and benefits of department employees, plus supplies and materials, other contractual services, equipment depreciation, and an allowance for facilities and administrative (F&A) costs..
Equipment depreciation will be based on an established depreciation schedule using straight-line depreciation. Items included in the University equipment inventory purchased with service clearing funds must be assigned to the service clearing department.
.040 Recharge and Service Centers
Recharge and Service Centers are those operating units that are in existence to conduct research or provide public services for University departments or the University community, although services may be provided on an incidental basis to external users. They are to follow the breakeven concept, which is accomplished by (1) balancing the accounts at the end of each fiscal year and (2) analyzing the rates on a fiscal year basis and adjusting them to account for any operating surplus or deficit.
In the course of fulfilling the University's mission of instruction, research and public service, products and services may result that can be sold to the University community or the general public. These by-products should be priced using the market rate, in order to avoid unfair competition with an external provider.
A Schedule of Charges must be submitted to the KSU Controller's Office, Financial Reporting & Inventory Section, and approved for all products and services offered by University departments. The standard Schedule of Charges form should be used, however, some flexibility is allowed for departments with a large number of charges. For example, if the department has a list of its charges in a word processing document, the Schedule of Charges form can be used as a cover sheet to that document. All Schedule of Charges forms must be accompanied by a Schedule of Charges Justification form. If an established charge needs to be updated, a revised Justification form needs to be included with the updated Schedule of Charges form.
.070 Establishing Billing Rates for Schedule of Charges
The rate for interdepartmental charges, including sponsored projects, will include the direct costs of providing the product or service, less any unallowable costs as defined in OMB Circular A-21, Section J. Direct costs are those costs that can be specifically identified with providing the product or service. This would normally include the non-state funded salaries, wages, and benefits of employees directly involved in completing the work, plus any supplies, materials, and other contractual services used in the work.
The base rate may also include an expense factor for depreciation, if the equipment meets all of the following conditions:
1. The equipment items are identified separately from non-service center equipment.
2. The equipment items exist and are usable, used and needed.
3. The equipment items have not outlived the depreciable life. Equipment items that have outlived their depreciable life are considered "fully depreciated".
4. The equipment was not purchased with federal funds.
Depreciation schedules should be established using the straight-line basis, assuming no salvage value, to determine the annual depreciation expense factor. The projected cost of replacement equipment cannot be included when developing depreciation schedules. When sales are made primarily to grant or contract accounts, depreciation should not be recouped.
If the products or services are offered to external users, a second rate will be established. For the purpose of charging for goods and/or services, students are considered external users. This second rate will be equal to the base rate established for interdepartmental charges (direct costs) plus applicable facilities and administrative (F&A) costs. The F&A cost portion of the rate would be equal to the base rate times the University's Federally negotiated rates: 48% for research activities and 34% for public service activities (Instructional sales and services are normally by-products, and as such, are usually priced at market). The rate used must be consistent with the Program Cost Account Code (PCA Code) on the FRS account that funds are deposited into. These rates may change when the F&A cost rates are re-negotiated with the Federal Government.
All F&A costs collected through the sale of goods or services to external users, need to be deposited monthly to the same department account and subcode as the direct cost portion of the fee.
University activities exempt from calculating F&A costs at the specified rates are: Auxiliary Operations (e.g. Housing, Parking, Lafene, KABSU), Administrative Central Services (e.g. Student Financial Assistance, Educational & Personal Development, Admissions, University Counseling Services), Recreational Services, McCain Auditorium, Copy Centers, Educational By-Product Sales, and Fines assessed by the Library and Parking Services. These activities normally establish prices at market rate and therefore do not need to distinguish between direct costs and F&A costs when substantiating prices on the Justification form.
Departments that charge fees to students for consumable supplies associated with classroom instruction may be eligible to apply to the Controller's Office for a waiver from collecting F&A costs.
University activities not exempt from collecting F&A costs at the specified rates include, but are not limited to, the following examples: Extension Sales, Testing done in conjunction with Research or Public Service Programs, and Sales to External Educational Institutions. These activities normally establish prices at breakeven and therefore do need to distinguish between direct costs and F&A costs when substantiating prices on the Justification Form. Questions regarding this should be directed to the Controller's Office.
.080 Checklist for Schedule of Charges
1. Have you followed the Board of Regents' Policy on Sales of Products and Services? (Please refer to PPM Chapter 6080.)
2. Is the product or service an integral part of the University's mission?
3. Do you have procedures in place to ensure a breakeven pricing schedule?
4. Have you ensured that state funds will not be needed to subsidize this activity?
If you have any questions on the procedures for Schedule of Charges, please contact the KSU Controller's Office, Financial Reporting & Inventory, 785-532-6525.
