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Developing a Usage Rate

Directive Statement

Costing requirements place numerous limitations on rates charged by the Educational Business Activities (EBA).  EBA units at the University of Florida must meet the following criteria:

  • Billing rates or fees for internal users must be designed to recover no more than the costs of the goods or services being provided
  • Costs must be consistently applied to all users and allocations based on actual use
  • The departments that recharge costs must develop cost data supporting the unit costs charged.  Recipients of Federal funds are not to recover more than the aggregate cost
  • Recharge to a sponsored project or other funding source may be applied only when there is a direct relationship to the project being charged
  • Only costs that are reasonable, allowable, allocable and consistently treated should be charged to a service center project and included in the rate calculation.  Per OMB Uniform Federal Guidance, direct costs charged to projects must adhere to the following fundamental principles Section §200.403 Allowability of costs, §200.404 Reasonable costs, and §200.405 Allocable costs

In rare cases, if faculty salaries are to be included in Educational Business Activity rates due to direct effort towards the EBA, they must be budgeted and paid from the approved EBA ChartField.   Effort reports, where required, should agree with salary expenditures charged to an EBA and expenditures must be supported through the documented annual University effort certification process.

Reason for Directive

All educational business activities, no matter the size, are subject to the cost principles set forth in the U.S. Office of Management and Budget Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards 2 C.F.R. §200 Subpart E §200.468 (“Uniform Guidance”).

Units must go through a rate development process to ensure an accurate composition of allowable costs on a cost recovery basis.  Although units may vary in size, complexity, and services provided by the units, they are required to follow common administrative practices.

Remember: Educational Business Activities classified as Auxiliary Enterprises are not part of this rate setting process.  The charges from Auxiliaries are defined as income to the University of Florida and are not considered a recharge of costs.  The rates set by the Auxiliary Enterprises are not subject for review of the Auxiliary Advisory Committee.

Who must comply?

All UF departments with educational business activities.

Developing a Usage Rate

Units must go through a rate development process to ensure an accurate composition of allowable costs on a cost recovery basis.  Although units may vary in size, complexity, and services provided by the units, they are required to follow common administrative practices.

Outlined on this page are suggested steps that a unit should take to ensure all necessary items are considered when going through the rate development process.

  1. Define Products or Services and Determine Related Costs: Educational business activities must determine what will be sold and the related costs of producing those goods and services.  These costs are used to establish a billing rate to charge for those products and services.  Billing rates should be established in measurable units and a separate rate should be established for each class of goods or services provided
  2. Estimate Customer and Facility Usage: Determine the customers (internal vs external) of the educational business activity, and estimate the use of the products or services that will be sold to the customers on an annual basis.  The usage base is the volume of work expected to be performed, expressed in units such as labor hours, machine hours, CPU time, or any other reasonable measurement
  3. Determine Allowable Operating Costs:
    • Direct Salaries: Salary and benefit expenses directly related to sale of the product or service provided. (6xxxxx Accounts)
    • Other Operating Expenses: Expenses that are directly related to the cost of providing the product or service. (7xxxxx accounts)
    • Administration or Overhead Salaries: Salary and benefit expenses related to the administration or oversight of the educational business activity.
    • Subsidies: Expenses that are directly related to the cost of providing the product or service that are recorded outside of the Auxiliary Chartfield.
    • Using Equipment purchased with Federal Funds: Costs and depreciation associated with equipment purchased using federal funds are not allowed to be factored into the billing price. With permission from the federal agency the equipment may be used by the Auxiliary.
    • Depreciation: Depreciation expense is not allowed to be included in the calculation of the billing rates because it is included in the Facility and Administration cost rate recovered from sponsors.
    • Unallowable Costs: Costs that are not allowed to be included as part of the internal billing price. These unallowable costs are referenced in the Allowable and Unallowable Costs page as well as OMB Uniform Guidance, Subpart E, §200.420 through §200.475
  4. Assign the Allowable Operating Costs to the Individual Product or Service: Since many educational business activities provide more than one service, each cost should be allocated to the different services in relation to their use in each service
  5. Calculate the Billing Rate: The billing rate is calculated by dividing the total annual cost directly chargeable to the facility by the total estimated annual usage

 

Annual Billing Rate = Annual Allowable Operating Costs + – Annual Operating Gain/(Loss)
Annual Usage Base

 

Definitions

Educational Business Activity

Revenue-generating activity from the provision of goods and/or services.  Such activity enhances, promotes, or supports the University’s instruction, research, public service and campus support functions, and other educational and support functions in order to meet the needs of students, faculty, staff, and members of the public participating in University events and programs.

Last Reviewed

05/01/2020: reviewed content

Resources

Allowable and Unallowable Costs

Types of Billable Units

OMB Uniform Guidance, Subpart E, §200.420 through §200.475

EBA Authoritative Guidance

Contacts

Educational Business Activity/Auxiliary Accounting: (352) 294-7236

Cost Analysis: (352) 392-5778

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