Procedure: 403.A-Calculating Rates for Revenue Producing Activities (RPA)
Rate Subsidies
Departments or divisions occasionally choose to subsidize all or part of the fees for a certain class of customers of the RPA. This is referred to as a rate subsidy. Examples of where rate subsidies might be used include:
- Graduate students in the department may be given free use of a computer lab while faculty members are charged.
- Faculty members in the department where the RPA resides are charged half price, while all other faculty members are charged full price.
- Users associated with a core grant are allowed free use of a facility while all other users pay full price.
OMB Circular A-21 prohibits charging different rates to different internal customers. An acceptable alternative which accomplishes the same objective is to charge the “subsidized” customers the same rate as other customers, but bill all or part of the rate to the funding source (i.e., gifts, grants, or fund 101) providing the subsidy.
Example: The Alchemy Department has gift funds they wish to use to subsidize departmental researchers who use the analysis lab. To accomplish this, all users are charged the same $10 per sample fee. When the internal charge is processed for their researchers, the charge is split with $5.00 charged to the department budget and the other $5.00 charged to the 133 gift funds.
Operational Subsidies
In general, RPAs should be self-supporting. However, departments may choose to subsidize an operation by paying a portion of the RPAs costs from another funding source and thus provide an operational subsidy.
The preferred method of accounting for the subsidy is to provide through the budget process, or other fund source, a pool of money against which those users who are to receive the subsidy charge the subsidy portion of the service. This can most easily be accomplished by splitting the charge on a percentage basis between the user’s project funding and the subsidy funding. In this way, all users are charged the same rate for services. The alternative method of providing subsidy to departmental users by discounting the rate, is complex, requires substantial documentation, and annual followup. The use of this method requires approval of the Dean’s office and the Office of Research and Sponsored Programs.
If an RPA is to be subsidized from departmental funds, care must be taken to properly account for the expenditures. An RPA that charges the same rate for all users can accomplish this by ensuring that subsidies come from the same UDDS as the RPA. The activity code of the funding must also match the activity code of the users. This step is necessary to assure the proper allocation of subsidy when the University assembles the federal indirect cost proposal for accounting expenditure reports.
Example: If upon analysis of the activity code of your RPA customer billings you find that 80% of the customers are Activity 4 (research) and 20% Activity 2 (instruction) the subsidy must come from institutional funds in the same 80/20 proportion.
The method of accounting for an operational subsidy is to:
- Deposit all revenue to the RPA;
- Pay all costs related to the activity from the same RPA;
- Analyze all customer billings at the time of preparing to transfer expenditures to determine the distribution of users and then transfer expenditures on a lump sum basis to the sources of the subsidy, in the same proportion as the customer base, using the appropriate salary or non-salary payment transfer form.
Operational subsidies are allowed but are less desirable than rate subsidies because the department may lose track of actual costs which should be used in calculating the RPAs rate.
If the RPA is funded or subsidized by extramural funding, identify the fund/account of the project and, if federal funds are involved, be sure that written approval has been obtained from the granting agency for reuse of revenues earned in support of the RPA. When an extramural subsidy is involved, the Office of Research and Sponsored Programs should be informed.
Procedure: 403.A-Calculating Rates for Revenue Producing Activities (RPA)