Policy: 403.A-Calculating Rates for Revenue Producing Activities (RPA)
Statement of Policy:
Full documentation of how rates are determined must be prepared for all RPA accounts. When an RPA is initially set up, it is acceptable to use estimates in determining rates. However, rates should be reviewed, recalculated and documented at least once a year using actual costs as a basis for the calculation. All records supporting rate calculations should be kept on file at the department for five years.
Replacement cost of equipment may not be built into rates, although depreciation on some non-federally funded equipment may be included in rates for fund 128 or fund 136 operations.
The policies that apply to developing rates differ depending on the type of user/customer. A user/customer is defined as the person, department, company, or organization that is paying for the goods or services. Users/customers are categorized into two types - internal and external, as described below.
Internal customers include: UW-Madison departments; all UW System institutions; and Wisconsin state agencies, including the Vocational, Technical and Adult Education (VTAE) Board. According to federal guidelines in the Office of Management and Budget (OMB) Circular A-21, sales to internal customers must be priced at or below the selling units cost of providing the good or service. Costs include all salaries, fringe benefits (except fund 101), supplies and services, capital and other expenses directly attributable to providing the good or service. Indirect costs, such as utilities, custodial services, or depreciation on buildings, are not included. Interest earned on fund 128 RPAs must be included as a decrease in costs. Rates must be applied consistently to all internal customers; different rates cannot be charged to different internal customers. Interest expense is an unallocable cost and cannot be included in any rates charged to federal grants.
External customers include: students; faculty; staff; student organizations; non-profit organizations; alumni associations; private sector entities and enterprises; governmental organizations (municipalities, local K-12 school districts, counties, and local vocational, technical and adult education schools); all colleges and universities which are not part of the UW System; and the general public. In general, goods or services sold to customers outside the UW System and excluding Wisconsin state agencies must be priced to recover all of the selling units costs of providing the good or service as well as the Universitys indirect costs as calculated by the Universitys federal indirect cost rate.
For RPAs that potentially are in competition with the private sector, refer to the UW Regent Policy 89-1, Competition With The Private Sector, approved by the UW Board of Regents in February 1990. This policy governs all sales of goods or services to external customers.
Who should know this policy?
Deans, Directors, and Staff Dealing With Revenue