Fee-for-Service Educational Activity Rate Principles
Overview
Fee-for-Service Educational Activity (FSEA) must develop a rate structure that is maintained and published, keeping in concordance with the required cost principles set forth in the Federal Uniform Guidance. Non-compliance with the regulations could result in fines or disallowed costs by the government or sponsors and could harm the reputation of the University.
Fee-for-Service Educational 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”).
Uniform Guidance
The Uniform Guidance sets forth the cost principles for Universities. The regulations address the questions of service center pricing, both general and specific. In general, the principles are designed to provide recognition of the fully allocated costs of such research work under generally accepted accounting principles. No provision for profit or other increment above cost for internal users is provided for in the Uniform Guidance. The rules set forth in the Uniform Guidance do allow that breakeven may be achieved over a long-term basis, if agreed to by the recipient and the cognizant governmental agency, and they provide for the mutual agreement on alternative costing arrangements. Uniform Guidance, Subpart E stresses the need for consistency in the treatment of costs as either direct or indirect.
This section addresses two concepts:
- Charges to internal users should not exceed costs
- The rate development process should not discriminate with respect to services charged to all internal users including governmental users
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.
Rate Types based on Type of Customer
Internal Rates (University Department)
Revenues should not exceed expenses for services provided over the period of work. If surpluses or deficits occur, rates must be adjusted.
External Rates (Anyone not paying through a University source of funds)
When establishing external rates, sensitivities to public companies must be taken into consideration. External rates are allowed to account for a surcharge over the break-even rate. FSEAs should take into consideration that external sales may be subject to Unrelated Business Income Tax (UBIT).
Cost Definitions
FSEA units are expected to recover all allowable direct costs, including FSEA administrative support costs, through the appropriate charges to its users. The cost of running a service center providing goods or services is charged to users on a “rate basis”. Rates are developed to recover allowable costs, as defined here.
Measurable Units
All Fee-for Service Educational Activities (FSEA) billings must be based upon measured and documented utilization that was properly authorized for the account charged. It is crucial to ensure that selected units of service are following appropriate costing guidelines when establishing a measurement method for a FSEA.
Consistent Rates
Rates must be consistent for every user for the type of service provided. While multiple services may be provided by a Fee-for-Service Educational Activity, the publicized rates must be the same for all types of users. Discounts based on usage or bulk sales are allowed but must be offered to all users and proof of cost must be provided.
Last Reviewed
Last reviewed on 03/20/2024
Resources
Audit Requirements for Federal Awards 2 C.F.R. §200 Subpart E §200.468 (“Uniform Guidance”)
OMB Uniform Guidance, Subpart E, §200.420 through §200.475
Allowable and Unallowable Costs
Contacts
Auxiliary Accounting: (352) 294-7236