Chargeback Forms and Information
Approved Chargeback Rates:
A chargeback occurs when one University unit provides a good or service to another University unit and seeks to recover the cost of the good or service. This document describes the policies and procedures for establishing chargeback rates at Binghamton University. It’s primary objective is to establish a University approved review and approval process that ensures users pay only their appropriate share of actual chargeback costs and that proper records are available to support the chargeback rate.
The process applies to all chargebacks conducted at the University including the State, Income Fund Reimbursable (IFR), Dormitory Income Fund (DIFR), SUTRA, Research Foundation (RF) and Binghamton University Foundation, Inc (BUF).
I. Costing Principles:
It is important that chargeback rates be established in accordance with applicable costing regulations. The primary guideline for educational institution rate setting is found in OMB Circular A-21, Principles for Determining Costs Applicable to Grants, Contracts and Other Agreements With Educational Institutions and the Cost Accounting Standards (CAS) Board. Basically these guidelines require that chargeback rates must conform to the following standards:
- Consistency in estimating, accumulating and reporting costs – to ensure that the practices used in estimating costs for a chargeback rate are consistent with those used by the University to accumulate and report costs.
- Consistency in allocating costs incurred for the same purpose – to ensure that each type of cost is allocated only once and on only one basis by the chargeback operation.
- Accounting for unallowable costs – to ensure unallowable costs are not included in chargeback rates. A sample listing of unallowable costs is provided in Exhibit 1.
- Cost accounting period – to establish time periods for cost estimating, accumulating, and reporting.
Chargebacks for goods and services must be charged directly to all users with no discrimination between federally and non-federally supported activities.
II. General Policies:
- Billing rates are designed to recover the direct operating costs of providing the good and service. No costs other than those incurred to provide the good or service may be included in the billing rates charged to campus units.
- Billing rates are based on a reasonable estimate of the cost of providing the good or service for a year and the projected number of billing units for a year. Actual costs and usage should be reviewed for reasonableness by the chargeback operation at least annually and adjusted as necessary. Although it is not expected that the billing rates will be exactly equal to the cost of providing the services during any one fiscal year the rate should be reviewed by the chargeback operation annually to ensure consistency with the long-term plan to operate on a break-even basis.
- A Chargeback Rate Development Worksheet (Chargeback Worksheet) will be prepared for each rate being requested. Supporting materials should be attached to the Worksheet as needed to support or explain the items presented. Where a chargeback operation provides different types of goods or services or a variable rate structure, a separate Chargeback Worksheet must be developed for each type. In the rare event that the financial system cannot support the segregation of costs for each individual chargeback operation then an alternate chargeback calculation method must be devised. The alternate method may involve utilizing averages, comparisons to providers of similar services at other colleges and/or professional judgement of what the market will bear.
- A Chargeback Rate Review Team (Chargeback Team) will be composed of a representative from each Vice President area and chaired by a person assigned by the Associate Vice President for Business Affairs. The Chargeback Team will review the purpose of the chargeback program and evaluate the reasonableness of the rate support information. The Team will review and recommend final approval of chargeback rates and appropriate chargeback account to the Chairman of the Chargeback Team.
- A separate account must be established in the University, RF or BUF accounting system for each chargeback operation. All cost components identified in the Chargeback Worksheet (personnel, fringe benefits, campus overhead and other than personal service expenses) will be charged directly to the assigned chargeback account. Likewise, costs not identified in the Chargeback Worksheet cannot be charged to the account. Accumulating chargeback cost information in this manner will provide information to support rate accuracy, allow for accurate monitoring of surpluses and deficits and provide managers with accurate information relating to their chargeback operations. To help avoid the proliferation of accounts, if an individual chargeback generates less than $10K of ‘revenue’ per year then a separate account is not needed.
- Charges are to be levied no later than 30 days following the month in which the service is completed. If not billed within that period, the billed unit can reject the charge. Departments who believe they have been charged amounts other than those approved for the good or service can contact the Business Affairs Office to verify that charges are appropriate. Errors in billings will be adjusted as necessary.
- If a chargeback operation provides services to individuals or organizations outside the University, the billing rates charged may be higher but cannot be lower than those charged to internal users plus overhead charges. Revenue from outside parties may have sales tax and Unrelated Business Income Tax (UBIT) implications and may require a separate account. Questions regarding sales taxes and UBIT and the need for a separate account should be directed to the Business Affairs Office.
- All intrafund charges (for example IFR to IFR) will be done by transferring expenses
between accounts (expenditure transfers). All interfund charges will be done through
the respective fund payment processes. The following chart illustrates the prescribed
chargeback process for each type of fund. Avoidance of the assessment of campus overhead
will not be sufficient reason to deviate from the established campus payment process.
This table contains details of chargeback, expenditure transfer and cash payments related to Binghamton University Chargeback Expenditure Transfer Cash Payments IFR IFR RF DIFR DIFR BUF SUTRA SUTRA STATE STATE RF RF BUF IFR DIFR SUTRA STATE BUF BUF RF IFR DIFR SUTRA STATE
- It is not appropriate to transfer chargeback operation revenues to other accounts to support unrelated activities. If funds have accumulated in a chargeback operation account because of prior or current year surpluses, an adjustment to future rates is necessary.
- In some instances, a chargeback operation may elect to subsidize its goods or services by charging rates that are lower than actual cost. Chargeback operation deficits caused by intentional subsidies may not be carried forward as adjustments to future billing rates. The amount and funding source of subsidies must be identified in the Chargeback Worksheet.
- Auditable financial, statistical and other records related to chargeback operations are the responsibility of the chargeback team chairman and must be retained for three years from the end of the fiscal year to which the records relate. Records are subject to audit by federal and other sponsors as well as internal and external auditors and University administrators.
III. Rate Development:
A. Cost Identification
- Care should be given to identifying all costs on the Chargeback Worksheet, as this will be the basis upon which chargeback rates will be established. Where possible, actual costs for the good and service should be documented and presented. Often it will be necessary to estimate activity and costs and the basis for such estimates should be clearly identified and explained.
B. Variable Billing Rates
- All internal users must be charged the same rate for a good or service provided by
a chargeback operation. There are two user designations for the purposes of billing
rate development and assessment:
- Internal users: those using State, IFR, DIFR, SUTRA, RF or BUF funds.
- External users: those who do not pay through the above funding sources
- While the base rate for a good or service for all users will remain the same, external users may be charged higher rates. A separate account must be established when there are a significant number of internal and external users of the good or service. External users must be charged at least the initial cost plus 13% overhead.
- Alternate pricing structures based on time of day, volume discounts, turn-around time, etc. are acceptable, provided that they have a sound allocating basis, do not discriminate among users and do not result in recovering more than the cost of providing the services. Alternate pricing structures should be clearly identified and explained in the Chargeback Worksheet. Alternate pricing structures will be published so users are able to consider the least costly means to obtain a good or service.
C. Cost Allocation
- There are generally three categories of cost that need to be allocated: (a) salaries of staff to provide the good or service (b)supplies and materials associated with the good or service and (c) depreciation associated with equipment used in the process.
- In addition to the direct costs associated with providing the good or service, significant deficit or surplus accumulations will be considered as adjustments to future billing rates.
- Where a chargeback operation provides multiple services and uses separate billing rates, the costs related to each service must be separately identified using a cost allocation process.
- When cost allocations are necessary, they should be made on an equitable basis that reflect the relative costs associated with providing the good or service. For example, if an individual is involved with multiple services, an equitable distribution of his or her salary among the various services would be accomplished by assigning the proportional amount of time the individual spends on each service. Other costing techniques such as the proportional amount of direct costs associated with each service, space used, may also be applied (refer to section II.3 of this policy in the event that other costing techniques fail to result in acceptable chargeback rates). Questions concerning appropriate cost allocation procedures should be directed to the Business Affairs Office.
D. Equipment Costs Included in Billing Rates
- The cost of equipment that will be used to provide the good or service should be recovered through assignment of a depreciation rate over its estimated life. Standard useful lives for various categories of equipment are included in Exhibit 2. The established rates will provide the chargeback operation with funds to replace the equipment in the future. The funds recovered by the depreciation charge should be set aside as an equipment replacement reserve to be drawn upon as needed. If additional funds are necessary to cover the cost of the new equipment, other sources may also be used.
- Equipment purchased either wholly or partially through federally funded sponsored programs may not be included in billing rates.
E. Inventory Accounts for Products Held for Sale
- If a chargeback operation sells products from an inventory or maintains an inventory of parts and supplies used in providing its services and the amount of stock on hand is significant, inventory records must be maintained. Although first-in-first-out is most common inventory method, valuations may be based on other methods (e.g., last-in-first-out, average cost, etc.). Once the inventory method has been chosen, the valuation method may not be changed.
- A physical inventory at cost must be taken at least annually at the end of the fiscal year and be reconciled to the inventory records. The inventory must be reported to the Business Affairs Office.
IV. Rate Review, Notification and Monitoring:
Completed Chargeback Worksheets should be submitted to the Chargeback Team through that area’s Vice President appointed representative. Thirty days should be afforded the Chargeback Team to complete its analysis of the proposal. In addition, all approved rates will be posted on the Business Affairs website 30 days before they are effective. Chargeback areas should provide adequate lead-time to receive Review Team approval and posting of the rate. It is strongly recommended that chargeback areas recommend adjustments before the annual budget development process so operations can properly budget for any changes in chargeback rates.
The Business Affairs Office will maintain a web site that will contain all proposed and approved University chargeback rates. Chargeback units may only charge internal users the rates approved for providing the good and service.
The Business Affairs Office will do periodic reviews of the financial records of chargeback operations focusing on the appropriateness of revenue and expense activity, surplus and deficits accumulation, and the adequacy of the chargeback operation’s record keeping practices.
Questions and concerns related to the campus chargeback process and procedure should be directed to the Business Affairs Office.
Billing Rate: The amount charged to a user for a unit of service. Billing rates are usually computed by dividing the total annual costs of the chargeback operation by the total annual number of billing units expected to be provided to users of the service.
Billing Unit: The unit of service provided by a chargeback operation. Examples of billing units include hours of service, animal care days, tests performed or machine time used.
Campus Overhead: An assessment to chargeback operations and other activities to support the administrative and support functions of the campus.
Chargeback: Financial transaction to charge for a good or service.
Chargeback Operation: An organizational unit that provides a good or service and charges for the good or service.
Chargeback Team: Individuals identified by the vice presidents to review and recommend chargeback rates to the Chairman of the Chargeback Team for approval and implementation.
Deficit: The amount by which costs of providing a good or service exceed the revenue generated during a fiscal year.
Direct Operating Costs: Costs that can be specifically identified with a good or service provided by a chargeback operation. These costs include the salaries, wages and fringe benefits of University faculty and staff directly involved in providing the good or service (i.e: materials and supplies, services, equipment rental or depreciation).
Equipment: An item of tangible property having a useful life exceeding one year and an acquisition cost as specified in Exhibit 2.
Fiscal Year: The 12-month period used for accounting purposes (July 1 to June 30).
Fringe Benefits: An assessment for costs associated with most personal and temporary service positions.
Internal User: A customer that will pay for the good or service through a State, IFR, DIFR, SUTRA, RF or BUF account.
Subsidy: Subsidized costs are identified as expenses that will be incurred by the chargeback operation but will not be recouped through the chargeback mechanism. The chargeback operation or University administration may choose to subsidize a service by paying a portion of its costs from another funding source.
Surplus: The amount by which revenue generated exceeds the cost of providing the good or service during a fiscal year.
Unallowable Costs: Costs that may not be charged as part of a chargeback fee. Examples of unallowable costs are provided in Exhibit 1.
Exhibit 1: Examples of Unallowable Costs
This list is based on the Federal Office of Management and Budget (OMB) (Circular A-21). The list is not all-inclusive and failure to mention a particular item of cost does not imply the cost is allowable or unallowable.
- Alcoholic beverages unless directly related to the program being provided.
- Cost of membership in any social, dining, civic or community organization.
- Unreasonable reimbursements for travel expenses; those which are outside the established travel policy of the institution
- Bad debts or uncollectable accounts.
- Donations or contributions.
- Costs of entertainment, including amusement, diversion and social activities and any costs directly associated with such activities.
- Advertising costs which are not used for (1) recruitment of personnel, (2) the procurement of goods and services required for the performance of the sponsored agreement.
Exhibit 2: Equipment Useful Life
Depreciation provides a method to recognize that the value of an item of equipment is consumed over an extended period of time, typically several years. This period is called the useful life of the asset. The following asset categories and useful lives are for use for chargeback operation equipment.
- Assets Purchased with State & IFR Funds $1,500
- Assets Purchased with Research Foundation Funds $ 5,000
- Assets Purchased with Foundation Funds $1,500
- Computer Equipment/Printers (including software purchased with equipment) 5 years
- Furniture 10 years
- Scientific/Technical Equipment 5 years
- Vehicles (cars and light trucks) 5 years
- Trucks (heavy duty) 6 years
- Shop Machinery/Tools 10 years
- Audio/Visual 5 years
Annual Depreciation is determined by dividing the cost of the asset by the number of useful years indicated above.
- This is a general guideline table. Exceptions will require written justification for an alternative recovery period. The justification should be submitted with the Chargeback Worksheet
- Salvage value shall not be considered to calculate depreciation.
- Once the recovery period has been set and depreciation has begun, it cannot be changed.
- No depreciation is allowed on assets that have outlived their depreciable life (recovery period).