CALCULATING RATES
1. Does your recharge center have a printed schedule of current rates including a supporting schedule showing how rates are billed?
Ideal Answer: YES. To ensure a recharge center maintains financial stability, a new rate schedule, effective at the beginning of the fiscal year should be produced in the spring. It should be provided to current customers, in advance, so they can budget for any increase in rates. It should also be made available to any new user.
2. Are rate policies and procedures for billing charges spelled out?
Ideal Answer: YES. The rate schedule should describe the fees and methods of assessment so users understand how they will be charged. When labor charges are involved the hourly rates and minimum labor charges must also be identified.
3. Are recharge rates reviewed annually?
Ideal Answer: YES. A cursory rate review should be done at the start of the calendar year to determine if a rate increase is needed. This should be undertaken shortly after the impact of any actual or expected wage agreements for University employees are known. A review may also be triggered by a significant actual or expected change in usage. The results of this review will impact the extent of rate calculation needed.
4. Is the rate calculation supported by source documentation that includes how rates are developed and assumptions behind projected changes in expenses and income?
Ideal Answer: YES. This is essential to avoid the disallowance of charges by Federal auditors. Where prior year actual costs are used as a basis for rate calculation, expense schedules and SFS statements from which the costs are extracted must be retained with rate calculation workpapers. When forced to use estimates, notes on assumptions or projected costs provided by outside sources must be included with the workpapers. (See Accounting Services RPA Rate Calculation Procedures)
5. If included in your rate calculations, do you have supporting schedules for:
Ideal Answer: YES. Employees must keep detailed time records that identify both billable and non-billable hours. These records are used to compute both the actual hours billed to customer projects, and the billable rate per employee during the annual rate review.
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Ideal Answer: YES. Fringe benefits must be recovered for recharge centers operating from funds 128 and 136. Revenue Producing Activities (RPAs) have the option of calculating fringes based on the current fringe benefit rates provided by RSP notices or actual fringe benefit charges.
Ideal Answer: YES. Direct materials used must be tracked and assignable to specific products or services. Costs may be charged directly to the customer's project(s) or to an internal direct cost pool that is used in the annual rate calculation.
Ideal Answer: YES. Indirect materials should be tracked and charged to internal cost pools. Indirect materials are those materials that cannot be assigned to a specific product or service so they are charged to a cost pool that is allocated as one component of the rate in the annual rate calculation.
A. Labor?
B. Fringe Benefits?
C. Direct Materials?
D. Indirect Materials?
6. Are all costs included in the rate calculation paid from the billing unit?
Ideal Answer: YES. All expense included in the rate calculation and recovered through billing must be paid from the UDDS of the recharge center.
7. Is the salary used accurate?
Ideal Answer: YES. Salaries used in the rate calculation and billing should be based on pay rates at the time of calculation adjusted for known or projected fiscal year changes provided by the Office of Budget Planning. It is acceptable to group employees in similar titles to arrive at an average rate for the group.
8. Are unbillable salaries (overhead) allocated based on acceptable and documented productivity analysis?
Ideal Answer: YES. Unbillable labor should be allocated based on individual employee time records. Unbillable time should be assigned to cost pools that are used to reallocate costs during the annual rate calculation.
9. Does the equipment depreciation schedule contain any equipment funded from federal research projects?
Ideal Answer: NO. Depreciation on federally funded equipment cannot be included in user rates. This would constitute double recovery (they already paid for the original purchase) and could result in disallowances of charges to Federally funded projects.
10. Is equipment being depreciated removed from the indirect cost pool used by RSP to calculate the federal overhead rate?
Ideal Answer: YES. A recharge center must provide Property Control a list of the equipment included in the depreciation schedule and have them reclassify the items to "recharge" so they are not included in the indirect cost calculation pool.
11. Is the depreciation schedule logical and consistent?
Ideal Answer: YES. A detailed schedule that identifies the equipment being depreciated, UW inventory number, original cost, funding source(s), useful/technological life as identified by the manufacturer, the annual depreciation charge, and the accumulated depreciation must be maintained.
12. Is the equipment inventoried on a regular basis?
Ideal Answer: YES. A physical inventory of all depreciable equipment used in the recharge center should be conducted every two years.
13. Is equipment removed from the depreciation schedule as it is retired or scrapped?
Ideal Answer: YES. Before starting the annual rate review the equipment listed on the depreciation schedule must be confirmed with someone knowledgeable of equipment still in use.
14. Are all recoverable costs included in the rates?
Ideal Answer: YES. A recharge center should attempt to recover all allowable costs from users. Any subsidy should be determined ahead of time and be factored into the rates.
15. Are volume discounts or differential pricing offered?
Ideal Answer: NO. All customers should be charged a uniform rate. A simple rate structure is easier to construct and defend in the event of audit. While volume discounts may be acceptable, there must be a careful cost accounting, which clearly shows the cost of service varies with volume.
16. Is a different rate charged to University vs. non-University users?
Ideal Answer: YES. External users should be required to pay the full cost (including university overhead) of the service they receive. Only in those cases where the customers are needed to provide subjects for training or research data should the service be subsidized.
17. Does the operation compete with commercial ventures?
Ideal Answer: NO. The UW should not compete with the private sector by routinely selling to customers outside the University. (See the Regent Policy on competition)
18. Are external rates comparable to commercial rates?
Ideal Answer: YES. In cases where we are appropriately providing services similar to those of a commercial provider, our price should be set at the higher of cost or market to avoid using our tax exempt status to unfairly compete. Only in those cases where the customer is needed to fulfill the need for training or research data should we price below cost.
19. Are prior year records retained for future audits?
Ideal Answer: YES. Supporting detail for rate calculation, billing, deposits and reconciliations must be retained for six years as required by the University records retention schedule.