Implementing Cost Accounting Standards for Service Center

Service (recharge) centers are operating units established for the primary purpose of providing goods or services to the Colleges of CUNY. These centers recover their operating costs by billing or recharging user fees based on predetermined rates.

Since service center activities can result in charges, directly or indirectly, to federal grants and contracts, CUNY must comply with the Office of Management and Budget (OMB) Uniform Guidance. Federal cost accounting standards require that all service units at CUNY operate using consistent business practices in the treatment of revenues, costs, pricing and reporting.

Summary – Implementing Cost Accounting Standards for Service Centers

  • Annual cost studies are required as a basis for establishing user rates for service centers.
  • All costs included in a service center’s user rate should:
    • be related to the function of the center;
    • be allowable under OMB’s Uniform Guidance; and
    • not be reimbursable through the College’s F&A.
  • All costs should be consistently classified as either direct or indirect costs across all college departments.
  • Copies of all support documentation including detail expenditures, calculation of user rate and billings records should be kept by the service center for a minimum of 7 years in the event of an audit.
  • Fiscal year-end surpluses from a service center’s operation must be carried forward to the next year’s user Deficits from service centers must either be carried forward to the next year’s user rate or subsidized by other non-grant funds. Service centers will by definition always breakeven.
  • At least annually, the service centers management must review the center’s user rates to assure a significant surplus or deficit will not exist at year-end. If a significant surplus or deficit is projected, the user rates should be adjusted to reduce the projected variance.
  • All users must be charged equitably according to measures of actual usage with no internal user subsidizing another user.

Establishing a New Service Center

Before establishing a service center, a department should demonstrate that there is both a compelling need for the center and a clear benefit to be derived from providing goods and services within the College rather than through external commercial markets.

Requests for new accounts at the RF used for the operation of a service center over $100,000 in total annual gross operating expenses will not be approved unless the Service (Recharge) Center form has be signed-off by the following:

  • Dean or Department Chair - The establishment of any service center (including the continuation of all existing ones) must be approved by the related Dean or Department Chair of the College.
  • Fiscal Officer - Approval by the V.P. for Administration or Business Officer ensures that the methodology for development of applicable user rates is in accordance with generally accepted accounting principles.

Although service centers with $100,000 or less in expenses do not need advance approval and are exempt from the annual rate documentation requirements, they nevertheless must comply with these policies.

Procedure Overview

On or about May 1 of each year, a service center with over $100,000 of total annual gross expenses is required to submit a Service (Recharge) Center Rate Calculation template to the RF’s Finance department. Even if the service center is not charging its full rate, forms supporting user rate must be submitted for the next fiscal year.

For new service centers, a rate proposal should be submitted at least two months before plans to begin operations commence.

Rate documentation for a new service center should include the following information:

  • Budgeted expenses listed separately by major category (e.g. salaries, fringe benefits, supplies, equipment, service agreement). Expenses are then increased or decreased by any subsidy and/or prior year surplus or deficit. Expenses must also be segregated by, or allocated to, major product lines in order to determine whether breakeven is achieved for each product line.
  • Budgeted charges (revenues) based on the proposed rate(s) and the volume of activity for each type of product or service. This includes work-papers documenting the assumptions and method for determining the level of activity used to compute the rate(s).
  • The position title and percentage effort of all personnel whose salaries and benefits are included in the rate(s). For confidentiality, only the aggregate of these salaries and benefits are included in the rate documentation. However, internal work papers documenting how the aggregate has been derived must be maintained by the service centers.
  • For all equipment owned or used by the service center:
    • tag number
    • equipment type - date equipment is placed in service
    • acquisition cost - annual and accumulated depreciation
    • acquisition date - useful life
    • date of disposal or removal
    • disposal costs
    • salvage value
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