Special Fees and Use Charges—FAQ
Why would I want a use rate?
A use rate is a government-approved method to recover the costs to operate the lab/equipment/facility. There are a number of requirements that must be met to get an approved use rate, so a rate is not recommended for seldom used lab/equipment/facility with low operating costs. See the $5,000 threshold section below.
How are use rates calculated?
Actual expenses that have been charged to the use index for operation of the lab/equipment/facility for the prior two years are subtracted from revenue from the same period. The result is increased or reduced by any surplus or deficit in the ending balance. Finally, the adjusted balance is divided by logged use from the same two year period.
How often must I recalculate my rates?
Biennially. However, periodic rate reviews are suggested, and a new rate may be requested if needed to offset a potential surplus or deficit.
How often should I charge my users?
Charges to lab/equipment/facility users must be made on a monthly basis. Be aware that charges to projects over 90 days from the lab/equipment/facility use may be denied.
What about logbooks?
All lab/equipment/facility use must be logged, even if use is subsidized. Time spent for training, repair, and maintenance is a cost to operate the lab/equipment/facility and should be included in the calculation.
What info needs to be included in the logbooks?
Each entry in the logbook must include user name, date, the total units of use, and project index. This information will be included in the inter-account bill.
Do I have to charge everyone to use the lab/equipment/facility?
Choosing not to charge for all use is an example of a subsidy. This practice may result in a deficit, which will be the financial manager/department responsibility. To avoid overcharging some users, all use must be included in the logbook and must be included in the rate calculation.
Why is this process so involved?
The Federal government provides guidelines for establishing and monitoring use rates in OMB Circular A-21. The University is regularly audited, and an unfavorable audit may result in significant fines and penalties. Funding agencies may demand the return of funds and/or deny future awards. Government auditors target recharge centers (use charges) for compliance with government guidelines.
My calculated use rate is so high no one will use the lab/equipment/facility.
A lower rate may be chosen; however, this may result in a year-end deficit which is the responsibility of the financial manager/department.
What is the T106A line in my account statement?
A portion of each dollar in use charges is returned to the department. It is intended that these funds be used for replacement/upgrade/repair of the lab/equipment/facility, although they may be used for other expenses related to lab/equipment/facility. To separate this overhead return from revenue, these funds will be transferred into a D99 index tied to the lab/equipment/facility use rate index.
What are allowable costs?
- Staff salary for effort related to training, maintenance and repair of the equipment/lab/equipment/facility.
- Staff time spent performing/running tests for clients of the lab/equipment/facility. This staff time may also be charged directly to the client’s index. If you choose to direct charge the operator salary, however, this salary cannot then be included in the rate.
- Service contracts, parts and supplies related to the equipment/lab/equipment/facility.
- Network connections (required for use of the lab/equipment/facility).
- Computers/software (required for use of the lab/equipment/facility).
- Travel related to the lab/equipment/facility.
What are unallowable costs?
- Administrative costs that include clerical time, telephone, photocopies and postage.
- Computers/software that do not meet the criteria described above.
- The cost of capital equipment (see the next section for more information).
Why can’t I have capital equipment in use rate calculations?
Capital equipment is defined as equipment over $5,000 in cost and these items are depreciated. Depreciate expenses are included in the facilities and administrative rate (overhead/indirect costs)
How do I fund expensive replacement parts?
Replacement parts required to keep the lab/equipment/facility functioning are allowable in the use rate. This also applies to replacement parts with an acquisition cost over $5,000.
Can I directly charge operator salary to a client’s index?
Yes, but those costs may not be included in the use rate calculation.
What is income and what is its significance to use rates?
Income is defined as revenue exceeding expenses. Guidelines allow for an annual balance of +/- 5% of revenue. A use rate may be denied if your balance is greater than +5%. Any revenue exceeding the 5% must be included in the next period’s rate calculation.
To avoid generating income, account balances need to be monitored and all allowable costs charged to the index during a fiscal year. For instance, it is allowable to maintain a reasonable stock of regularly use parts and supplies, but not a stockpile.
If I cannot maintain a positive balance from year to year, how will I pay for expensive repairs?
Expensive parts may be purchased when needed and expensed over 4 years. The cost for the part must be incurred in order to amortize the costs. In these instances a rate change may be requested.
I was denied a rate, what should I do now?
If you are denied a rate, you may not charge for the equipment’s use. Reasons for denial include an excessive surplus balance that results from little to no expenses or an inaccurate use rate. To receive a new rate the applicant must submit a plan that details how the balance will be expended. In this instance a new rate request may be made after a minimum of 6 months activity. Continue to log use in the logbook.
Can I run a deficit?
In some circumstances, yes. They include a deficit of - 5% of revenue resulting from unexpected costs or a deficit resulting from amortizing a repair part. In either case the deficit will be factored into the following rate application.
Who is responsible for the deficit?
The financial manager/department will be responsible for repeated or increasing deficits. A deficit due to unexpected costs or low usage cannot be carried for more than two years.
Managing the $5K Threshold
How can I recover costs to operate if I do not meet the $5K threshold?
A use rate will not be approved unless revenue from use rate charges is equal to or exceeds $5,000 at least once in a 2-year period. In some cases you may group lab/equipment/facility into a single rate to meet the threshold. See below.
What is a grouped lab/equipment/facility rate?
A single group rate may be chosen IF a specimen/process/experiment regularly requires the use of each piece in the group.