Procedure: 403.A-Calculating Rates for Revenue Producing Activities (RPA)

Appendix 1 Guide to Rate Calculations

  1. Basis for rates charged, whether labor, materials, or depreciation, must be substantiated by adequate records. These records must be retained for five years (e.g. time and effort records, use logs, sales and receipts, etc.)
  2. Only costs paid from the operation may be recovered from internal users.
    • Fringe benefits are not paid from 101 funds, so they cannot be included in 101 operations’ rates.
    • Depreciation can’t be accumulated on 101 funds, so it may not be included in 101 rates, except to commercial/external users.
    • Depreciation may not be included in the rate if the equipment was purchased from federal funds. If only partially purchased from federal money, that portion is excluded from depreciation calculations. Exception: Depreciation may be recovered when charging external users, even though equipment was federally funded. A 128 operation may recover depreciation, even if equipment was purchased with other than 128 funds (so long as it was not 144 funded) even though the charge is to a 101 user.
  3. Materials used should be charged at actual cost.
  4. Rates should be charged according to type of user.
    • Rates to internal users must be applied consistently, with no price discrimination for different users. University overhead is not included in internal rates.
    • State and/or municipalities (including schools) should be charged at direct cost (including depreciation) plus fringe benefit recovery level only.
    • Instate, private schools and colleges may be charged at the same rate as above in the "spirit of cooperation".
    • Out-of state or commercial users should be on a full cost recovery, commercial level of charge. Rates should not be lower than commercial entities are charging for like services or products.
    • Off campus federal users will be charged according to the service agreement involved: the minimum level being direct cost plus fringe benefits (if fringe benefits are applicable).
  5. There are a variety of options available as a basis for charging users for space: square feet of space used; percent of total areas used, per hour, day, week, etc.; percent of time used; per room; or combinations of these. When utility usage is exceptional, cost of utilities may have to be included in charges for space usage. Help in calculating utility costs may be obtained from the Physical Plant accounting office.
  6. Charges for equipment usage may be based on hours, units of production, or percent of total capacity or percent of time used. In all cases, the most equitable basis should be chosen.
  7. A fund 128 chargeback operation usually may accumulate a cash balance equal to the amount of accumulated depreciation. Because external rates are higher than internal rates, a surplus in excess of accumulated depreciation may be allowed providing:
    • You can document that the excess is due to commercial sales, and
    • You can show that the excess is needed to replace equipment.
    • The excess is not on federally funded equipment.

    If these conditions are not met, internal and federal user rates should be adjusted downward to gradually eliminate the surplus.

Procedure: 403.A-Calculating Rates for Revenue Producing Activities (RPA)