Auxiliary Enterprises - These units are self-supporting activities which provide non-instructional support in the form of goods and services to students, faculty, and staff upon payment of specific user charge or fee for the goods and services provided (e.g., residence halls, bookstores). The general public is served only incidentally.
Capital vs. Operating Lease - A capital lease is a lease in which the lessee treats the property as an asset - capitalizes it and depreciates it. Depreciation is an allowable expense to the recharge activity, but principal debt repayment costs are not.
For a lease to be a capital lease, one or more of the following criteria must be met (according to Financial Accounting Standards 13):
In an operating lease the lessee does not own the equipment. The item can not be depreciated, but the lease costs can be included entirely as operating expenses.
Credits to expenditure accounts - UC Accounting policy (Accounting Manual D-371-23) for handling vendor rebates is being revised. The revisions include the following:
Equipment Depreciation - Equipment purchased by the Recharge/Service Center through their equipment reserve account or from institutional funds and donated equipment may be depreciated. The amount of depreciation should be calculated using straight-line depreciation. The useful life used can be either the UC guidelines for useful life or may be developed and supported by the recharge activity. Local justification which is appropriately documented is preferable. These pieces of equipment should contain special custodial codes so that they can be excluded from the indirect cost rate development. Equipment purchases can be charged directly to the recharge fund ONLY when the equipment has a useful life of one year or less.
Equipment Purchases- There are only two possible ways for equipment to be purchased, through equipment reserve accounts that have accumulated via the depreciation mechanism or from institutional funds. Otherwise, an operating lease can be used to provide the necessary equipment. External loans or capital leases can be used to provide equipment; however, the debt repayment costs cannot be recovered fully through the recharge rate, only certain interest costs and depreciation of the equipment can be included in the rate. Given these limitations Deansí offices may wish to modify their approach to subsidizing recharge centers by providing funding for equipment rather than salaries. An equipment reserve for recharge centers will be established with institutional funds that would be repaid through depreciation, similar to the working capital that has been available to some service enterprise units.
Federal Funded Equipment - Equipment that was purchased in part or in full using federal funds should NOT be depreciated and included in the recharge rate. A special custodial code will be given to this equipment so that it will be excluded from the indirect cost rate development.
Interest - OMB Circular A-21 allows external interest costs to be included in the cost basis for development of recharge rates but does not allow for the recovery of internal interest. Interest will be credited to Recharge/Service Center operating accounts with a positive balance, but will not be credited to equipment reserve funds.
Inventories - Inventory accounts should be established in accordance with UC policy (Business & Finance Bulletin BUS-54). Current policy indicates that these should be established "when the combined inventory value of new and unissued material in a department exceeds $50,000 at one or more locations on a campus or exceeds $50,000 at an off campus location."
Major Specialized Service Facility (MSSF): is a unit that provides institutional services involving the use of highly complex or specialized facilities AND incurs operating costs of $1,000,000 or more. UCI has none of these.
Recharge - A recharge is the assessment and collection of a charge by one University department/unit/activity/project for goods or services, furnished to another University department/unit/activity/project. A recharge transaction is appropriate when the furnishing department has incurred expense to make available a product or service which is sold to customer departments for an established price, or at a price based on an established standard pricing method.
Recharge Center: is a unit with recharge operating costs, excluding pass through costs, under $500,000. Example units include: EH&S, Bio Sci Support Services, Phy Sci Store
Record retention - Records will be maintained according to UC and UCI Administrative Policies & Procedures (Section 721-10).
Renovation costs - Renovation costs are unallowable, but the depreciation of renovations done specifically to provide the service of a center can be included in the centerís rate calculation. Renovation Costs are defined as significant alterations or structural changes to plant assets which increase the usefulness, enhance the efficiency, or prolong the life of the property and are, therefore, capitalized.
Service Center: is a recharge unit with operating costs between $500,001 to $1,000,000 OR a unit with operating costs of $1,000,000 or more that does not involve the use of highly complex or specialized facilities. Example units include: Academic Computing, Library Copy Services, Plant Operation, Temp Services, ULAR.
Service Enterprises - These units are service departments which provide a specific type of service to various institutional departments, rather than to individuals, and which have operating costs supported by recharges to the departments receiving the services (e.g., Fleet Services, Storehouses, Mail Division, Electronic Communication Services). These units are generally totally self-supporting.
Subsidies - A subsidy reflects costs that are not recovered through a recharge rate. The amount, funding source, and purpose of each subsidy must be disclosed. Subsidies are normally provided to keep the charge for a service lower than the full cost basis would require. Subsidies can be provided to cover general recharge expenses or may be used to cover specifically identified expenses. Subsidies may NOT be used to discriminate among recharge users without an acceptable justification. Subsidies can be provided in the form of:
The above types of subsidies of recharge activities should be identified as part of the recharge activity. However, no subsidies should be included in the calculation of the recharge rate. The department should link the recharge account with the subsidy fund and record these subsidized expenses on the general ledger for a recharge activity. Only technical salaries and benefits of personnel directly related to the recharge activity should be included.
Training - An annual meeting of all recharge units will be held to provide units with assistance in performing the annual recharge rate review, as well as to provide the latest information on policy changes.