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Special needs of the University community may stimulate establishment of a service center. Services provided by a service center must promote the education, research, or public service missions of the University. The University does not intend for service centers to compete with private business. See also Executive Policy Manual EP17.
Any WSU operation that intends to charge for goods, services, and/or use of equipment must obtain the prior approval of the Office of General Accounting.
For purposes of this policy, a service center is defined as any University operation that charges for goods, services, and/or use of equipment.
Types of service centers are defined as follows.
Internal Service Provider
The primary purpose of an internal service provider is to provide specific services to the University community. An internal service provider provides a method for generating revenue to offset costs. Examples of WSU internal service providers include: Motor Pool, Franceschi Microscopy and Imaging Center, University Stores, or any unit that charges fees for publications, copying, or equipment use.
The costs associated with internal service activities are separately accounted for and charged to customers in proportion to services rendered. Other characteristics include the following:
- The costs of each service may include its direct costs, and when appropriate, indirect costs, i.e., overhead.
- The service center should be a break-even operation; that is, rates should not recover more than the total costs of the service center over a long-term period (normally defined as two years).
An enterprise account is established primarily to make sales to non-WSU entities, although services may also be provided to internal customers, i.e., faculty, staff, and students. Design and Printing Services is an example of an enterprise account.
Specialized Service Facilities
Specialized service facilities (SSF) are institutional services involving the use of highly complex or specialized facilities such as electronic computers, wind tunnels, and reactors. (Uniform Guidance, 2 CFR 200)
Exceptions to Policy
Unless exceptions are specifically granted in writing and in advance, service centers must comply with this section (30.15). Written requests for exceptions must be submitted to General Accounting for review and approval.
Contact General Accounting; telephone 509-335-2013; email email@example.com; for help with establishing rates, determining appropriate customers, accounting for sales, or any other service center concern.
When policy noncompliance or irregularities occur, state or federal auditors may recommend the disallowance of charges to grants. Amounts disallowed by virtue of failure to comply with this policy are the responsibility of the responsible dean and/or the department.
Enterprise Accounts Only
Fees charged by enterprise accounts for goods, services, or facilities must take into account the full direct and indirect costs, including overhead. (RCW 28B.63.040) NOTE: This policy and statute do not apply to recharge operations.
Exceptions to this policy must be approved in writing and in advance by General Accounting.
See Service Center Defined for definitions of enterprise account and recharge operation.
The University charges most federal grant and contract sponsors for Facilities and Administrative (F&A) costs. As such, rates for purchases from such federal grant and contract accounts are not to include overhead, e.g., administrative service charge or Modernization fee. See BPPM 40.25 for more information about F&A costs.
FDM Driver Worktags
Expenditures and receipts are to be accounted for under the same University Foundation Data Model (FDM) driver worktags (e.g., cost center, program/gift/grant/project) unless the service center has received permission from the University Controller to account for operations in a different manner.
The procedures described in this section do not apply to the following operations.
Services (e.g., testing, workshops) to non-University entities provided on a contractual basis. Such contracts are processed through the Office of Grant and Research Development and/or Finance and Administration. See also BPPM 10.11 and BPPM 40.02.
Interdepartmental Sale of Surplus Equipment
NOTE: Surplus Stores is a service center and is not included in this exclusion.
Degree programs instruction in regular, extension, evening, or continuing education.
WSU Extension Programs
Tickets for Athletic and Artistic Events
Admittance to intercollegiate athletic events or artistic performances, e.g., plays, concerts, exhibitions.
Events put on by University groups to raise funds or to seek donations for University purposes.
Auxiliary Enterprises are comprised of various service providers that deliver a variety of goods and services. Auxiliary service units recover operational costs by charging for services provided.
Examples of auxiliary enterprises include: Housing and Dining Services, Parking and Transportation Services, and Student Recreation Center.
Intellectual Property Ownership and Data Rights
The University asserts an ownership interest in all intellectual property developed using University resources, including the intellectual property resulting from service center operations. (See Definitions for a definition of intellectual property.)
The University does not assert an ownership interest in data developed by performance of “service only” tasks in a service center. (See Definitions for a definition of “service only.”) The University retains the right to use “service only” data for its own internal noncommercial research and education if able to do so without disclosing the customer’s confidential information.
A service center may accept only “service only” tasks and may not agree to perform tasks which could reasonably be expected to create intellectual property. In the event a service center task results in the unanticipated creation of intellectual property, WSU notifies the service center customer of such intellectual property within thirty days of the Office of Commercialization’s receipt of invention disclosure forms from University inventors. (See Executive Policy 38 regarding invention disclosure.)
“Intellectual property” is defined as the inherent value produced by human creativity and invention, which is protected by law from unauthorized exploitation by others. Intellectual property includes patents, copyrights, trademarks, know-how, trade secrets, and other proprietary information.
“Service only” is defined as performance of standardized manufacture, formulation, processes, or established testing procedures to obtain data which is not a discovery, invention, or improvement.
Service Center Administrators
Service center administrators are responsible for the operations of the service center. Administrators include the responsible dean or director, chair, and service center manager. The responsibilities include the following:
- Read and comply with this section (BPPM 30.15).
- Assemble and verify the accuracy of information required to:
- Establish the service center,
- Develop a fair and consistent rate methodology, and
- Establish the rates charged customers.
- Calculate and review service center rates at least annually.
- Submit applications for rate review to General Accounting as required by this section.
- Consistently apply service center rates to all customers within each category.
- Ensure that unallowable costs are not included in rate calculations, e.g., advertising. See Unallowable Items.
- Maintain accurate and complete records of operations.
General Accounting oversees service centers. The Controller supervises General Accounting. The responsibilities of General Accounting include the following:
- Provide guidance to University personnel.
- Review and approve rates for service centers in a timely manner and in conformance with this section (BPPM 30.15).
- Perform rate reviews.
- Monitor compliance of service center transactions with federal regulations relating to the University’s periodic F&A rate proposal.
- Monitor service center compliance with federal Cost Accounting Standards (CAS); specifically:
CAS 501 – Consistency in estimating, accumulating and reporting of costs.
CAS 502 – Consistency in allocating costs incurred for the same purpose.
CAS 505 – Accounting for unallowable costs.
CAS 506 – Cost accounting period.
Establishing a Service Center
In order to establish a service center, a requesting operator completes a Service Center Application, and a rate proposal spreadsheet. The operator submits the two completed documents to the responsible dean/director and chair for approval and then to General Accounting for final review and approval. This information provides data requested by auditors.
Procedures for completing these two documents are provided below.
A service center manager completes a Service Center Application to establish a service center, to seek approval to charge specified categories of customers, and to seek approval to provide specified services.
Alternative Application Format
General Accounting may approve an alternative application format when appropriate.
Completing the Service Center Application
Print or photocopy the PDF master and complete it according to the following instructions. Form blanks without explanation are considered self-explanatory.
Name of Service Center
Enter a descriptive title which reflects the function of the service center.
Service Center Account
Do not complete this section unless there is a pre-existing account. Applicable in either of the following cases:
- The application is a renewal
- Generated revenues are to be treated as recoveries of expenditures (Small service centers only.)
Indicate the name of the department that is responsible for and/or sponsors the service center.
Service center managers may only sell to the categories of customers indicated and described on approved Service Center Applications. Indicate categories of customers to be served. Check all that apply.
Sales to University departments and organizations. These sales are noncash transactions completed through the Internal Service Delivery business process of the Workday system. Internal service providers conduct sales to these customers.
WSU Faculty, Staff, or Students
Direct personal sales to University staff, students, or faculty. Such sales must meet the following criteria:
- Sales should be substantially and directly related to at least one of the University’s primary missions, i.e., instruction, research, or public service.
- Sales should support and represent a special convenience to the campus community or facilitate the extracurricular, public service, or residential life of the campus community.
Sales to entities or personnel not directly affiliated with the University. Such sales are to be for goods and services that must meet the following criteria:
- Substantially and directly related to the unit’s educational or research mission,
- Not commonly available in the local marketplace,
- In demand in the external community.
The external sales activity may not be solely due to excess capacity within a University unit.
Sales to Public Agencies
A WSU service center may provide goods and services to other governmental entities (local, state and federal) if a written document defining the terms of agreement is signed by authorized representatives from each agency in conformance with the Interlocal Cooperation Act (RCW 39.34). (See BPPM 10.10.) Contact Finance and Administration for assistance.
Provide a written description of the anticipated customers, e.g., departmental students, faculty professional organizations.
Provide ample detail to clearly demonstrate why the service center should be established or renewed. Possible justifications include, but are not limited to:
- Goods/services are not readily available from University or private providers. (Indicate where similar services may be obtained.)
- Goods/services are a by-product of professional or vocational training.
Establishment of service centers which duplicate services provided by private establishments must be thoroughly justified. Any such justification should document how the proposed service center will provide benefit to the University and support one or more University missions.
Proposed Service–Description and Scope
Describe in detail services, products, and retail items offered to customers. The service center may only provide the kinds of services indicated in the application. Additional kinds of service require complete reapplication.
The supervisor and department chair/director indicate approval and route the application to the responsible dean or vice president. By approving the application, the responsible dean or vice president assumes financial responsibility for service center activities. Approved applications are routed to General Accounting.
If separate FDM driver worktags are designated for the service center, General Accounting or the department enters the appropriate worktags on the form.
Preparing Rate Proposal
The service center manager prepares a spreadsheet that identifies, calculates, and documents the components of each requested rate. The manager may use the automated Service Center Calculation Worksheet (in Excel), or may prepare their own spreadsheet. Check with General Accounting to determine if the substitute rate spreadsheet is sufficient. (NOTE: The automated worksheet assists the manager in developing the rate for proposals.)
The manager should consider the following when preparing the rate spreadsheet.
Sources of Revenue
The spreadsheet should indicate sources of revenue by customer category.
EXAMPLE: If students make up a portion of the service center income, a line showing the amount of revenue attributable to students would be sufficient.
For new service centers, use anticipated dollar amounts and revenue categories.
Specify and identify components of the total cost relating to the service center and estimate annual amounts. The “total cost” of the service center should be collected. By not including total costs in the recharge rate, the service center increases the risk of incurring a negative working capital fund balance.
NOTE: If the service center provides services to projects supported by federal grant or contract accounts, the University’s accounting system automatically excludes the administrative service charge from related charges. See explanation under Administrative Service Charge.
Described below are examples of specific costs that:
- If incurred by an enterprise account, must be recovered by internal service activities through the rates.
- If incurred by an internal service provider, may be recovered by internal service activities through the rates.
Salaries, Wages, Benefits
Include each individual employee (e.g. faculty member, sponsored project administrator), who spends a portion of his or her time directly involved with the activities of the service center. Include the percentage of full time equivalent effort that each individual devotes to the service center plus fringe benefits to derive the amount to be included in the charge rate for the activity.
NOTE: After Foundation Data Model (FDM) worktags are assigned to a new service center, the individuals earning salaries and wages in the operation must have their supporting account sources adjusted to reflect the change in activity. Contact General Accounting for assistance as needed.
Supplies and Materials
Supplies or materials that are identifiable with a specific customer’s order should be billed directly to that customer. If the supplies and materials cannot be identified with a specific customer or order, such items should be included in the supplies and materials expense pool and used to calculate the charge rate for all customers.
All other direct costs, e.g., costs of equipment maintenance contracts, should be specified in the schedule and included in the calculation of the billing rate.
For information regarding equipment costs to be included in the internal service rate development refer to Equipment.
Administrative Service Charge
Certain service centers are assessed the administrative service charge by the central administration. These costs are includable in the operations rate computation and should be documented on the spreadsheet. These overhead costs are not the same as University-wide facilities and administrative costs, which are costs incurred for the University as a whole. (See BPPM 40.25.)
NOTE: The administrative service charge is not to be included in rates assessed projects supported by federal grants.
Contact General Accounting if the cost of a building or building component is to be factored into the rate calculation.
Estimate the total annual cost of operating the service center and divide that cost by the total estimated billing units to determine the billing rate per unit. For example, a billing unit for a service center that provides photocopies would be a per copy amount, whereas a billing unit for an activity which provides services would be based on an amount per hour of service.
The following items are specifically not to be included as part of internal service rates.
Interest may not be included in the rates when service centers fund equipment purchases with internal loans and include as an expense the principal and interest repayment on the debt. (Uniform Guidance, 2 CFR 200)
Uniform Guidance Items (2 CFR 200)
Items explicitly disallowed by federal Uniform Guidance, 2 CFR 200, may not be included in the rates. Examples of such items include but are not limited to:
- Entertainment costs
- Bad debts
- Public relations
- Donations and contributions
- Alcoholic beverages
- Goods or services for personal use
- Fines and penalties resulting from violations of (or noncompliance with) federal, state, or local laws and regulations.
Establishing a Budget
The service center is to establish a budget separate from any other activity. This budget is entered in Workday under unique FDM worktags assigned by the Controller’s Office.
Each nonfederally-funded equipment item having an original cost of $5,000 or greater should be capitalized and depreciated over the useful live of the item.
Service centers have several ways to acquire equipment:
- Equipment may be purchased by a department using nonfederal or state funding, such as gifts or federal/state F&A funds, and turned over to the service center. However, assets purchased by federal contracts or grants must be excluded from internal service rate computations when the department is charging WSU federal grants.
- Equipment may be leased (with or without an option to buy).
- Equipment may be purchased from the equipment reserve funds of the service center.
- Equipment may be donated to the University and turned over to the internal service activity.
NOTE: Although not technically considered equipment, individual equipment items costing less than the University’s equipment capitalization threshold may be built into the internal service rate and purchased using internal service operating funds.
It is recommended that the service center send a copy of the potential equipment list, with University asset identifiers, to General Accounting before calculating rates. This allows the service center to know exactly which assets are includable and the amount of depreciation to factor into the rates.
From the asset identifiers, the Office of Property Inventory checks and verifies information, e.g., use of the correct depreciable life, asset valuation, and original fund source.
When appropriate, Property Inventory changes the ownership code for the equipment to avoid the inclusion of the equipment depreciation in the computation of the University’s F&A cost rate.
Service centers should calculate equipment depreciation on a straight-line basis over the useful life assigned by Workday. If the department believes that the equipment will work longer than the useful life assigned in Workday, the department may use a longer useful life amount in the depreciation calculation if reviewed and approved by the Controller’s Office.
Equipment Reserve Accounts
If equipment depreciation is used in the rate, the service center establishes an equipment reserve worktag to generate funds for equipment replacement. By establishing and funding such a such a worktag, reliance on equipment grants or the availability of
other University funds is reduced or eliminated.
The depreciation process prorates a portion of the cost of equipment to each period the equipment is in use or over the life of the equipment. This is accomplished by levying a charge against the service center operating worktags. A corresponding credit is applied to the equipment reserve worktags.
Equipment, and equipment upgrades that are capitalizable are purchased using the equipment reserve worktags. The equipment purchased may replace the depreciated equipment or it may be different equipment entirely. The only requirement is that the equipment be used for purposes within the scope of the approved service center activity.
The service center is to review equipment maintenance contracts in order to ensure that agreements covering unallowable assets are not included in the service center’s rates.
There are three important issues to emphasize regarding equipment:
- The purchase price of capital equipment cannot be included in a service center’s rates. An asset that costs more than the University’s capitalization threshold must be capitalized and only the depreciation for the year may be included in the recharge rate.
- Excess fund balances may not be used to purchase equipment. Equipment may be purchased only through use of the equipment reserve worktags.
- The equipment depreciation component of the service center’s rates may not include any factor to accumulate balances to provide for the upgrading of equipment or for inflationary increases in replacement costs. There are some instances where this may be allowed when the department is charging external customers. See General Accounting for details.
Volume discounts or other special pricing mechanisms are allowable; however, they must be equally available to all customers who meet the criteria and must not be subsidized by other customers. See General Accounting for details, including state laws and regulations involved.
Service centers may charge different rates to different groups of customers, as long as the service center can demonstrate that WSU federal grants are not paying more than the cost of the service it is receiving.
Frequently a recharge activity provides more than one service, accumulating a surplus on some services and a loss on others. Combining the results of various services is acceptable if the customer groups for each service do not greatly differ. Higher prices should not be charged to one group of customers to offset losses resulting from undercharging another customer group.
Renewals or Changes
Full Renewal Application
A service center renews its application with General Accounting annually in any of the following cases:
- Any change in rates or rate structure.
- Launch of any new sales venue, such as an e-commerce site.
- Costs or number of processed units have significantly changed since the last application.
- Customer category or type of service provided has changed since the last application.
- Revenues exceed expenditures by more than 20 percent.
- Deficit standing. Provide updated fiscal year business plan to recover.
Application renewal requires that the service center manager submit all documentation required for initial establishment of the service center.
If there is no condition that requires full renewal, the service center manager simply submits a memorandum requesting renewal of the previous year’s application providing a brief summary of financial health. In such cases, a full service center renewal application must be submitted at least every three years.
Either a full renewal application or a memorandum requesting renewal of a previous application must be submitted to General Accounting each year by May 15.
A service center manager submits all service center application materials to request a change of rate, proposed service, or category of customer served. Submit the application documentation at least one month before the planned effective date.
Service centers which accumulate significant operating balances may have overcharged customers. In such cases billing rates are to be revised to keep expenses and income in reasonable balance.
Billing rates should be revised as often as necessary to avoid accumulating either a surplus in excess of two months’ working capital reserves or a deficit in the internal service account. Rates should be reviewed periodically throughout the course of the year to ensure that a proper rate structure exists. If rates are found to be inappropriate, new rate proposals should be submitted to General Accounting at least one month before the new rates are to become effective.
Managing Service Centers
Service centers should not transfer revenues, expenditures or fund balances to other activities. Such transfers can distort billing rate calculations or alter the break-even plan.
Service center operators are responsible for applying the following regulations when considering or completing sales transactions with customers.
University facilities, equipment, or services may not be used to assist in campaigns for:
- Election of any person to any office. (RCW 42.17.130)
- Promotion or opposition to any ballot proposition. (RCW 42.17.130)
- Promotion or opposition of an initiative to the legislature. (RCW 42.17.190)
Service center operators may only sell to the categories of customers indicated and described on the approved Service Center Application.
Personal Sales to WSU Faculty, Staff and Students
When the service center is authorized to sell to WSU personnel but not authorized to make sales to the external community, the service center is responsible for ensuring that customers are current WSU faculty, staff, or students. The service center may request that the customer produce a current WSU identification card to verify affiliation with the University.
Service centers are responsible for collecting sales tax for nonexempt goods and services provided to most external customers. Use Table 1 as a guide to determine whether sales tax should be collected.
|CLIENT CATEGORY||SALES TAX||NO SALES TAX||CITATION|
|WSU personnel (personal sales)||X||RCW 82.08.020|
|Private agencies||X||RCW 82.08.020|
|Cities, counties, local school districts||X||WAC 458-20-189|
|Washington state agencies||X||WAC 458-20-189|
|Federal agencies (outside of WSU)||X||WAC 458-20-190|
|Out-of-state (when shipped out-of-state)||X||WAC 458-20-193|
Sales Tax References
Ordering, Receipting, and Billing
All services and goods provided to customers are to be accounted for and recorded.
Internal Service Delivery (Workday)
Service centers with a high volume of transactions may request access to the Internal Service Delivery business process in the Workday system, which provides automated customer billing. (See the Workday Internal Service Delivery reference guide.) Access to the Workday business process is linked to the Internal Service Delivery Data Entry Specialist role. To request assignment of this security role to departmental personnel, see BPPM 85.33 and the Workday Security Access and Request for Security Partner reference guide.
NOTE: Service centers may charge a premium to external customers, as long as the revenue is recorded in Workday with the External to WSU identifier. This identifier allows tracking of the excess revenue and provides proof to federal auditors that the service center is operating as an internal break-even operation.
See BPPM 30.56.
The service center maintains all merchandise and/or consumable inventories by using either a perpetual or periodic inventory tracking method and completing a physical inventory count at least annually (see BPPM 20.53).
Contact General Accounting for information and assistance concerning conducting a physical inventory count.
Retain service center records in accordance with the All-University Records Retention Schedule and the unit’s Records Retention Schedule. See BPPM 90.01 for an explanation.
It is essential that the service center’s costs and usage base be adequately documented to support the billings. Accordingly, each service center must observe the following practices:
- Collect and retain supporting documentation related to actual and accrued costs incurred by the service center.
- Maintain adequate records to support the number of hours or other measure of services and/or materials that form the basis for customer billings.
- Retain working papers demonstrating rate development.
- Prepare cash sale invoices and internal sales documents in accordance with BPPM 30.52, 30.53, 30.56, and 30.57.
Subject to Audit
Service centers are subject to periodic review by the University’s Office of Internal Audit and by external auditors. Auditors evaluate compliance with established University policies and accounting practices. Therefore, service centers activities must be adequately documented, and records should be retained for periods indicated on approved retention schedules. (See BPPM 90.01 for information about University retention schedules.)