What is a Service Center?
A service center is an operating unit at Texas Tech University (TTU) providing goods or services to one or more university departments. Such a service might be available from commercial sources but, for reasons of convenience, cost, regulatory compliance, quality, or fiscal control are often provided more effectively through an on-campus unit. Some examples of service centers are scientific apparatus repair shops, glassblowing shops, instrument-making shops, chemical stores, data processing, central stores, and animal care facilities.
Since service center activities can result in charges directly or indirectly to federal grants and contracts, the university must comply with the Uniform Guidance Subpart E Cost Principles as well as Cost Accounting Standards. These federal regulations limit charges to users to a rate that only recovers the costs of providing the good or service. Therefore, service centers are not meant to operate at a profit; they must break even over time.
Service center rate development and periodic rate reviews are managed by Accounting Services. TTU accounts for all related service center revenues and expenses in 17A funds, and each service center is assigned its own fund.
Rate development can be summarized in the following six steps:
- Define the good or service:What is the purpose of the service center?
- Identify all related costs:This includes salaries, operating costs, depreciation, and any prior year negative or positive fund balances.
- Determine the estimated usage measurement:Will the output be measured in hours? By unit? By service?
- Estimate the amount of customer usage:How much output, by usage measurement, do you expect the service center to fulfill in a given fiscal year?
- Allocate costs to each good or service (if more than one):If there are different measurable units, for different types of goods or services, which costs support which output?
- Calculate the billing rate using the following breakeven calculation:
estimated costs +/- carryforward - subsidy
Rates should be reviewed and adjusted on an annual basis. Fund balances (or net income) from the prior year are included in determining the new rate as mentioned in step 2 in the section above with the exception of positive fund balances that represent less than 60 days of working capital. If all costs are not recovered by sales of the service center in the prior year, a department may subsidize the costs with alternative local funding in order to keep rates from spiking too high in the subsequent year. However, because this represents a cost to the university, subsidies are subject to approval.
Service centers should bill users on at least a monthly basis using the Financial Transaction System (FITS) or the Banner Fiscal Gateway (for approved users). Documentation to support billing is maintained by the facilitating department in accordance with TTU Operating Policies.
More detailed information on rate calculations, roles & responsibilities and allowable revenues & expenses may be found in TTU Operating Policy 62.23 Academic Service Centers.
For additional questions, Accounting Services contacts can be found for 17A Designated Service Centers in the My Fund Accountant contact listing.
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