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Misc

Overtime charges are generally allowable for personnel other than faculty members and should be distributed proportionately to all activities during the time period in which they are earned.   

e.g. Employee A, who is overtime eligible, works 20 hours on cost Center 14-XXXX  and 30 hours on budget XX-XXXX for a total of 50 hours.  Cost Center 14-XXXX should be charge 40% (20/50) of both the regular earnings and the overtime earning for employee A. In addition, if employee A’s cost center activity involved more than one job for the time period, each job would normally share in the overtime earnings charged to the cost center.

Overtime charges can be recovered in two ways.  1) If overtime can be estimated with a high degree of certainty the incremental costs should be distributed to and included in the appropriate services prior to determining the rates for those services.  2) If overtime cannot be estimated with a high degree of certainty or is unanticipated the cost can be recovered through the next proposal cycle, via the over/under recovery adjustment.  3) The incremental cost of the overtime (overtime salaries plus the additional fringe benefits) can be added to the charges for ALL services (jobs) that employee worked on during the period of time the overtime was earned. Note, this is not a rate adjustment rather it represents only the actual incremental (additional) costs of the overtime.

Imputing Revenue for Recharge and Cost Centers – Imputing revenue represents the process of adjusting revenue to reflect an amount free from subsidies and other less than full reimbursements, e.g., bad debts, when determining future rates for recharging.  In essence it adjusts revenue to assume full reimbursement from all users of the recharge/cost center.  This is necessary to ensure the Federal government does not wholly or partially participate in the subsidies or other less than full reimbursements.  Recovery of the subsidy would need to be done through non Federal sources and usually from non University sources.  Most commonly this would be recovered from external users by crediting the center’s reserve budget or an alternate budget.  Depending on the amount of the subsidy this could also be recovered over a period of time, e.g., 2-3 years.

 

Example:

Department contributes a $10,000 piece of equipment to a recharge center. In consideration of this the recharge center provides the department with $10,000 of unbilled service.  For the current rate cycle the annual operating costs for the center were estimated to be $100,000.  For determining rates for the next rate setting cycle the unit would need to determine their carry forward balance as follows:

Actual expenses for the year                      $101,000

Less:

Actual revenue (internal/external)                (89,000)

Imputed revenue1                                             (10,000)

 

Net (profit)/loss (carry forward)               $    2,000

 

1 Represents unbilled services to department in consideration of equipment purchase of $10,000

Mid-year equipment purchases represent equipment acquisitions that do not coincide with the fiscal period of the recharge/cost center.   As a result, they are sometimes included in the annual rate proposal if anticipated or are not included if they were not anticipated or not able to accurately estimate.  In either situation, the following applies:

Depreciation for mid-year equipment purchases cannot be included in quarterly JVs until the equipment has been placed into service in the center and a new depreciation schedule has been approved by the Dean/VP’s office and MAA.

Special consideration should be given when any portion of the acquisition will be charged to a sponsored project(s) or the equipment will not be used 100% by the center. These situations should be discussed with your Dean/VP’s office and MAA as soon as possible to determine if there are any unique issues associated with the equipment (e.g., program income implications).

 

Including Mid-Year Equipment Purchases in annual proposal

When the purchase of a piece of equipment for the operation of a recharge/cost center (center) is expected to occur within a period covered by a rate schedule, that piece of equipment may be included in the depreciation schedule of the rate proposal.

For a future equipment purchase to be eligible for inclusion in a center rate proposal, the acquisition date and cost of the equipment should be known or accurately estimated.

The depreciation start date should be based on the anticipated acquisition date. This is usually the start of the quarter following the acquisition date of the equipment. Center rates cannot include depreciation for equipment for any period prior to the anticipated acquisition date. For example, if the center rate begins July 1st and the anticipated in service placement of the new equipment is October 1st, the center can only include 3 quarters, or 75%, of the annual depreciation for that year.

 

Mid-Year Equipment Purchases not included in annual proposal

When the purchase of a piece of equipment for the operation of a center occurs within a period covered by a rate schedule and that piece of equipment was not included on the depreciation schedule in the rate proposal, centers should update their depreciation schedule and determine whether a mid-year rate adjustment is needed. 

  • If a mid-year rate adjustment is necessary,  the center should submit an adjustment approval request to both their Dean/VP’s office and/or MAA highlighting the updated costs and the new depreciation schedule.
  • If a mid-year rate adjustment is not necessary, the center should submit the new depreciation schedule to their Dean/VP’s office and/or MAA notating that a new proposal is not necessary. 

Beginning with Quarter 3 2014 MAA will begin to send delinquent letters to the Recharge Centers contact and cc the corresponding Dean/VP Office. The letters will be sent 8 weeks after the quarter ends to give centers time to finalize the report. 

 

This letter will only be sent to Recharge Centers as Cost Centers are not required to send quarterly reports only to their Dean’s/VP’s office.

 

Summer (7/1-9/30)–

                Due date second week of November

                Escalation letter sent first week of December

 

Autumn (10/1-12/31) –

                Due date second week of February

                Escalation letter sent first week of March

 

Winter (12/1-3/31) –

                Due date second week of May

                Escalation letter sent first week of June

 

Spring (4/1-6/30) –

                Due date second week of September (due to fiscal year end)

                Escalation letter sent last week of September

Recharge and Cost Centers are responsible for submitting rate proposals in a timely manner. Beginning March 2014 MAA will begin sending courtesy emails to the Recharge Center contacts reminding them of the need to submit a new rate proposal. This email will be sent approximately 6 weeks prior to the expiration of the current rates.

 

Should the proposal not be received by MAA prior to the expiration of the current rates, a second follow-up email will be sent to the Dean/VP office with a copy to the Recharge Center contact. MAA will maintain a list of delinquent centers which will be provided to the Internal Audit Office on a monthly basis.

 

These emails will only be sent to Recharge Centers as the responsibility for conducting annual rate reviews for Cost Centers is the responsibility of the Deans/VPs office.

Capital leases essentially represent capital acquisitions and therefore must be handled in a like manner.  Additionally, capital lease payments may not provide an accurate representation of the center’s depreciation for the asset(s).   For this reason recharge and cost centers’ capital lease principle payments must be charged to the center’s reserve account (budget) and not to the center’s operating account (budget).  To recover the cost of the asset(s) the center must determine the appropriate annual center depreciation which may be charged to the center’s operating account and recovered through their recharge rates.  Note, external interest associated with capital leases should be charged to centers’ operating accounts and recovered through the recharge rates.

 

Recharge/cost centers who are presently charging capital leases to their operating account may be grandfathered on this change on a case-by-case basis but only for current capital leases.  Future capital leases for these centers must be handled in the above manner.  If your center is one that presently has this arrangement in place please contact Management Accounting and Analysis so that we may assess your specific situation and advise you of actions to be taken. 

In an effort to ensure centers are costing their rates appropriately a variance analysis report reflecting the previous year’s estimated costs to actual costs must be submitted within 45 days after the close of the rate cycle. The report should include an explanation of any material differences, i.e., +\- 10% or more AND +/- $5,000 or more, from the original cost estimate.  If there are any material encumbrances they should also be reflected.

 

For example, if the estimate for salaries was $30,000 and the variance +$3,500 an explanation would NOT be required as the variance is less than $5,000 even though it is greater than 10%.  Similarly, if the salary estimate was $75,000 and the variance +$5,500, an explanation would NOT be required because the variance is less than 10%.  Only if the variance dollar amount is equal to or greater than $5,000 AND the variance percentage is equal to or greater than 10% will an explanation be required.

 

A variance report excel template can be found on the MAA website under Forms/Templates.

 

Budget

Actual

Diff

%

Material

Reason

 

 

 

 

 

 

        10,000

        7,500

        2,500

25.0%

No

<5000

        10,000

        2,500

        7,500

75.0%

Yes

>5000 & >10%

        25,000

      21,000

        4,000

16.0%

No

<5000

        25,000

      19,000

        6,000

24.0%

Yes

>5000 & >10%

        50,000

      54,000

      (4,000)

-8.0%

No

>5000 & >10%

        50,000

      43,000

        7,000

14.0%

Yes

>5000 & >10%

        75,000

      69,000

        6,000

8.0%

No

<10%

        75,000

      81,000

      (6,000)

-8.0%

Yes

<10%

      100,000

      91,000

        9,000

9.0%

Yes

<10%

      100,000

      89,000

      11,000

11.0%

Yes

>5000 & >10%

Food purchases are unallowable on recharge and cost center operating budgets* unless the following exceptions apply:

 

  • The center has a programmatic requirement for food purchases.  In other words the food being purchased must be essential to the operations of the center.  If this is the case, it should be clearly stated in your rate proposal.
  • Centers may purchase meals or refreshments for meetings or conferences IF technical information pertaining to the center’s operations is disseminated.  In such cases an agenda and other documentation must be kept on file to prove the content of the meeting/conference.  If the meeting/conference was not approved ahead of time in your proposal, a food approval form will be required.

Visit the following link for the food approval form, details on how to fill it out, and additional information on food purchases. http://f2.washington.edu/fm/food-approval

 

*Food purchases are allowable on reserve budgets (program type 21 & 23) if the purchase directly benefits the center, however centers must still comply with UW food approval policies.

Current University guidelines allow for the Technology Recharge Fee to be included on approved recharge and cost center budgets, see http://www.washington.edu/uwit/trf.faq.html.  The percentage of the Tech Recharge Fee to the center should not exceed the FTE percentage of the associated employee assigned to the center.  For example, if an employee is assigned 50% to the recharge/cost center, the percentage of the Tech Recharge Fee charged to the recharge/cost center should not exceed 50% of the total amount assessed to the department.

 

 The two most appropriate allocation methodologies are:

  • Allocate the fee to individual rates based on the same allocation of the related salary
  • Allocate the fee to internal center overhead.

Centers should choose the methodology that most accurately reflects how costs reflect.

Encumbrances are not the same as accrued expenses.  Encumbrances can represent a number of things, but are most commonly used to represent an outstanding obligation or commitment.  These figures can be used for planning and or budgeting purposes, but they do not represent actual expenditures. 

 

For example, when a service contract is agreed upon procurement services will set up a purchase order in the system, the total dollar amount of the service contract will then show up as an encumbrance even though no services has been provided or paid for yet.  As services are received and payments made, the encumbrance is reduced. Encumbrance amounts also represent the open balance amounts of an order.  For more information please visit the encumbrance website, http://f2.washington.edu/fm/gca/encumbrances-0.

 

An accrued expense occurs when an item or service has been received within a certain period, but the payment for it did not post or was not recognized in that same period.

 

Encumbrance figures should not be included in the financial reports unless it is known that the encumbrance amount meets the accrued expense definition.

On occassion a center may be asked by an external customer to complete a W9 form before a payment can be received.  For more information on how to fill out a W9 visit the following link. 

https://f2.washington.edu/fm/tax

No.  Centers are allowed to submit mid year rate adjustments at any point throughout a center's rate cycle.

Please refer to the following website for information on invoice receivables, https://f2.washington.edu/fm/sfs/ir/intro .  Included on the site is a link to a document that explains in detail the receivables procedures including guidlines and standards for the State of Washington.

The main difference between the two is the size of the center.  A recharge center is defined as generating $1 million or more in total revenue and/or charging $175K or more to UW federally funded budgets within a fiscal year.  A cost center is defined as generating less than $1 million in revenue AND charging less than $175K to UW federally funded budgets within a fiscal year.  Recharge centers are required to send their annual rate proposals and financial reports to MAA as well as their Dean's/VP's Office, whereas cost centers are only required to send their annual rate proposals and financial reports to their Dean's/VP's Office.  All other policies and guidelines apply to both budget types.

No.  The NIH salary cap does not apply to recharge and cost centers.

Cost centers must submit their rate proposals to MAA for review and approval when any of the following apply:

  1. The initial establishment of the center,
  2. New services or products are added,
  3. Significant changes are made to the methodology used to calculate the rate(s).

Uniform Guidance is short for "Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards".  This is a set of federal guidelines laid out by the Office of Management and Budget (OMB) that recharge and cost centers must adhere to, with some exceptions.  For additional information or to browse the Uniform Guidance click here.

Recharge Centers

Overtime charges are generally allowable for personnel other than faculty members and should be distributed proportionately to all activities during the time period in which they are earned.   

e.g. Employee A, who is overtime eligible, works 20 hours on cost Center 14-XXXX  and 30 hours on budget XX-XXXX for a total of 50 hours.  Cost Center 14-XXXX should be charge 40% (20/50) of both the regular earnings and the overtime earning for employee A. In addition, if employee A’s cost center activity involved more than one job for the time period, each job would normally share in the overtime earnings charged to the cost center.

Overtime charges can be recovered in two ways.  1) If overtime can be estimated with a high degree of certainty the incremental costs should be distributed to and included in the appropriate services prior to determining the rates for those services.  2) If overtime cannot be estimated with a high degree of certainty or is unanticipated the cost can be recovered through the next proposal cycle, via the over/under recovery adjustment.  3) The incremental cost of the overtime (overtime salaries plus the additional fringe benefits) can be added to the charges for ALL services (jobs) that employee worked on during the period of time the overtime was earned. Note, this is not a rate adjustment rather it represents only the actual incremental (additional) costs of the overtime.

Imputing Revenue for Recharge and Cost Centers – Imputing revenue represents the process of adjusting revenue to reflect an amount free from subsidies and other less than full reimbursements, e.g., bad debts, when determining future rates for recharging.  In essence it adjusts revenue to assume full reimbursement from all users of the recharge/cost center.  This is necessary to ensure the Federal government does not wholly or partially participate in the subsidies or other less than full reimbursements.  Recovery of the subsidy would need to be done through non Federal sources and usually from non University sources.  Most commonly this would be recovered from external users by crediting the center’s reserve budget or an alternate budget.  Depending on the amount of the subsidy this could also be recovered over a period of time, e.g., 2-3 years.

 

Example:

Department contributes a $10,000 piece of equipment to a recharge center. In consideration of this the recharge center provides the department with $10,000 of unbilled service.  For the current rate cycle the annual operating costs for the center were estimated to be $100,000.  For determining rates for the next rate setting cycle the unit would need to determine their carry forward balance as follows:

Actual expenses for the year                      $101,000

Less:

Actual revenue (internal/external)                (89,000)

Imputed revenue1                                             (10,000)

 

Net (profit)/loss (carry forward)               $    2,000

 

1 Represents unbilled services to department in consideration of equipment purchase of $10,000

Mid-year equipment purchases represent equipment acquisitions that do not coincide with the fiscal period of the recharge/cost center.   As a result, they are sometimes included in the annual rate proposal if anticipated or are not included if they were not anticipated or not able to accurately estimate.  In either situation, the following applies:

Depreciation for mid-year equipment purchases cannot be included in quarterly JVs until the equipment has been placed into service in the center and a new depreciation schedule has been approved by the Dean/VP’s office and MAA.

Special consideration should be given when any portion of the acquisition will be charged to a sponsored project(s) or the equipment will not be used 100% by the center. These situations should be discussed with your Dean/VP’s office and MAA as soon as possible to determine if there are any unique issues associated with the equipment (e.g., program income implications).

 

Including Mid-Year Equipment Purchases in annual proposal

When the purchase of a piece of equipment for the operation of a recharge/cost center (center) is expected to occur within a period covered by a rate schedule, that piece of equipment may be included in the depreciation schedule of the rate proposal.

For a future equipment purchase to be eligible for inclusion in a center rate proposal, the acquisition date and cost of the equipment should be known or accurately estimated.

The depreciation start date should be based on the anticipated acquisition date. This is usually the start of the quarter following the acquisition date of the equipment. Center rates cannot include depreciation for equipment for any period prior to the anticipated acquisition date. For example, if the center rate begins July 1st and the anticipated in service placement of the new equipment is October 1st, the center can only include 3 quarters, or 75%, of the annual depreciation for that year.

 

Mid-Year Equipment Purchases not included in annual proposal

When the purchase of a piece of equipment for the operation of a center occurs within a period covered by a rate schedule and that piece of equipment was not included on the depreciation schedule in the rate proposal, centers should update their depreciation schedule and determine whether a mid-year rate adjustment is needed. 

  • If a mid-year rate adjustment is necessary,  the center should submit an adjustment approval request to both their Dean/VP’s office and/or MAA highlighting the updated costs and the new depreciation schedule.
  • If a mid-year rate adjustment is not necessary, the center should submit the new depreciation schedule to their Dean/VP’s office and/or MAA notating that a new proposal is not necessary. 

Beginning with Quarter 3 2014 MAA will begin to send delinquent letters to the Recharge Centers contact and cc the corresponding Dean/VP Office. The letters will be sent 8 weeks after the quarter ends to give centers time to finalize the report. 

 

This letter will only be sent to Recharge Centers as Cost Centers are not required to send quarterly reports only to their Dean’s/VP’s office.

 

Summer (7/1-9/30)–

                Due date second week of November

                Escalation letter sent first week of December

 

Autumn (10/1-12/31) –

                Due date second week of February

                Escalation letter sent first week of March

 

Winter (12/1-3/31) –

                Due date second week of May

                Escalation letter sent first week of June

 

Spring (4/1-6/30) –

                Due date second week of September (due to fiscal year end)

                Escalation letter sent last week of September

Recharge and Cost Centers are responsible for submitting rate proposals in a timely manner. Beginning March 2014 MAA will begin sending courtesy emails to the Recharge Center contacts reminding them of the need to submit a new rate proposal. This email will be sent approximately 6 weeks prior to the expiration of the current rates.

 

Should the proposal not be received by MAA prior to the expiration of the current rates, a second follow-up email will be sent to the Dean/VP office with a copy to the Recharge Center contact. MAA will maintain a list of delinquent centers which will be provided to the Internal Audit Office on a monthly basis.

 

These emails will only be sent to Recharge Centers as the responsibility for conducting annual rate reviews for Cost Centers is the responsibility of the Deans/VPs office.

Capital leases essentially represent capital acquisitions and therefore must be handled in a like manner.  Additionally, capital lease payments may not provide an accurate representation of the center’s depreciation for the asset(s).   For this reason recharge and cost centers’ capital lease principle payments must be charged to the center’s reserve account (budget) and not to the center’s operating account (budget).  To recover the cost of the asset(s) the center must determine the appropriate annual center depreciation which may be charged to the center’s operating account and recovered through their recharge rates.  Note, external interest associated with capital leases should be charged to centers’ operating accounts and recovered through the recharge rates.

 

Recharge/cost centers who are presently charging capital leases to their operating account may be grandfathered on this change on a case-by-case basis but only for current capital leases.  Future capital leases for these centers must be handled in the above manner.  If your center is one that presently has this arrangement in place please contact Management Accounting and Analysis so that we may assess your specific situation and advise you of actions to be taken. 

In an effort to ensure centers are costing their rates appropriately a variance analysis report reflecting the previous year’s estimated costs to actual costs must be submitted within 45 days after the close of the rate cycle. The report should include an explanation of any material differences, i.e., +\- 10% or more AND +/- $5,000 or more, from the original cost estimate.  If there are any material encumbrances they should also be reflected.

 

For example, if the estimate for salaries was $30,000 and the variance +$3,500 an explanation would NOT be required as the variance is less than $5,000 even though it is greater than 10%.  Similarly, if the salary estimate was $75,000 and the variance +$5,500, an explanation would NOT be required because the variance is less than 10%.  Only if the variance dollar amount is equal to or greater than $5,000 AND the variance percentage is equal to or greater than 10% will an explanation be required.

 

A variance report excel template can be found on the MAA website under Forms/Templates.

 

Budget

Actual

Diff

%

Material

Reason

 

 

 

 

 

 

        10,000

        7,500

        2,500

25.0%

No

<5000

        10,000

        2,500

        7,500

75.0%

Yes

>5000 & >10%

        25,000

      21,000

        4,000

16.0%

No

<5000

        25,000

      19,000

        6,000

24.0%

Yes

>5000 & >10%

        50,000

      54,000

      (4,000)

-8.0%

No

>5000 & >10%

        50,000

      43,000

        7,000

14.0%

Yes

>5000 & >10%

        75,000

      69,000

        6,000

8.0%

No

<10%

        75,000

      81,000

      (6,000)

-8.0%

Yes

<10%

      100,000

      91,000

        9,000

9.0%

Yes

<10%

      100,000

      89,000

      11,000

11.0%

Yes

>5000 & >10%

Food purchases are unallowable on recharge and cost center operating budgets* unless the following exceptions apply:

 

  • The center has a programmatic requirement for food purchases.  In other words the food being purchased must be essential to the operations of the center.  If this is the case, it should be clearly stated in your rate proposal.
  • Centers may purchase meals or refreshments for meetings or conferences IF technical information pertaining to the center’s operations is disseminated.  In such cases an agenda and other documentation must be kept on file to prove the content of the meeting/conference.  If the meeting/conference was not approved ahead of time in your proposal, a food approval form will be required.

Visit the following link for the food approval form, details on how to fill it out, and additional information on food purchases. http://f2.washington.edu/fm/food-approval

 

*Food purchases are allowable on reserve budgets (program type 21 & 23) if the purchase directly benefits the center, however centers must still comply with UW food approval policies.