UC IRVINE ADMINISTRATIVE POLICIES AND PROCEDURES
Business and Financial Affairs
Financial Planning (Budget)
Sec. 703-14: Sales and Services Income Guidelines
Responsible Office: Planning and Budget
Revised: July 2011
References / Resources
- UC Regulation No. 4
- UC Business and Finance Bulletin
- A-61, Procedures for Determining Unrelated Business Income and Expenses
- UCI Administrative Policies & Procedures
- Section 703-13, Recharge Accounts and Rate Review Procedures
Contact: Associate Director, Planning and Budget at (949) 824-7676
This procedure establishes a mechanism for requesting, reviewing, and approving Sales and Services Agreements between the University community and a non-University entity. The charges established for the sale of goods and services provided by campus departments to non-University users shall recover full University costs, both direct and indirect.
A. University Policy
University laboratories, bureaus and facilities are not to be used for tests, studies or investigations of a purely commercial character, such as mineral assays, determination of properties of materials, the performance efficiencies of machines, analyses of soils, water, insecticides, fertilizers, feeds, fuels, and other materials, statistical calculations, etc., except when it is shown conclusively that satisfactory facilities for such services do not exist elsewhere. Those requiring such tests or services should apply to business firms or to such public agencies as the State Division of Mines, the State Department of Agricuture, or the State Food and Drug Laboratory, etc. (Excerpts from UC Regulation No. 4)
- Sales & Services Agreement - A Sales & Services Agreement is initiated when a campus unit wishes to render a service or provide goods to a non-University user for which revenue is collected. This transaction is appropriate when the furnishing department incurs expense to make available a product or service which is sold to the non-University user for an established price, or at a price based on an established standard pricing method.
- Non-University user - A non-University user is either an organization or individual who uses campus services or facilities or purchases goods from a campus unit and who is not a member of the campus community (faculty, staff, students).
- Non-University User Fees or Service Charges - These are the fees levied against organizations or individuals who are not members of the campus community to help cover the cost of using campus facilities, services, or programs.
- Direct Costs - Direct costs are readily identifiable costs which are associated with the furnishing of goods and services by the department.
- Indirect Costs - Indirect costs are costs that cannot be readily identified with or related to a specific department or unit. For the purpose of these guidelines, indirect costs shall include appropriate amounts for campus overhead costs, including Building Usage, Equipment Usage, Operation and Maintenance of Plant, and General Administrative Services.
C. Campus Approval Process
The Budget Office is the office of record for matters concerning fees levied against non-University users.
The originating unit will complete the following:
- request to establish/link/delete fund or revenue account
- a short narrative description of the proposed sales and services activity with the proper approval from Dean or Director's Office
- proposed Budget and Rate analysis for new sales and services account
- Activity Information Sheet
- Sales & Services Agreement (will be reviewed by Material & Risk Management)
The Budget Office will:
- review for appropriateness
- seek Material & Risk Management review and approval of the agreement
- seek Office of Research Administration (ORA) review and approval for issues associated with intellectual property
- make final approval
- notify unit when agreement is approved.
D. Campus Implementation Guidelines for Sales and Services Income
- User Verifies that Income Should be Classified as Sales and Services Income
- Is income without contractual requirements and irrevocable?
Then it should be deposited as a gift.
- Is the product or service customized?
Then it should be deposited as a private contract or grant.
- Is the product or service standardized?
Then it should be deposited as sales and services income.
- Is income without contractual requirements and irrevocable?
- User completes an Activity Information Sheet
Sales and Services Activities are those standardized activities performed for non-University entities. The Activity Information Sheet provides a summary description allowing for campus approval of the indirect cost rate to be charged and ensuring that the appropriate direct and indirect costs are recovered.
The campus uses a modified version of the Other Sponsored Activities Rate (37.5%) when charging for indirect costs on Sales and Service activities. After subtracting certain components of the Other Sponsored Activities Rate generally unused by Sales and Service activities, such as recovery for Student Services and Sponsored Projects Administration, the resulting modified rate is 29.8%. This indirect cost rate covers the cost that the campus incurs relative to providing the goods or services, in other words, the overhead costs of departmental administration, general administration, building and equipment usage, and the operation and maintenance of the physical plant - approximately 51% of this rate covers overhead provided by the department, with the balance covering central campus overhead. Departments must charge a rate on their Sales and Service activities that is high enough to cover their costs, plus the indirect cost rate.
No overhead is applied to Sales and Services Activities that are related solely to student activities, conferences, compensation plan and patient care income, or affiliation agreements. Waivers or reductions to the basic rate may be approved by the Chancellor when requested by the department and endorsed by the Dean or Director, following review by the Budget Office.
- Accounting for the Indirect Cost Recovery
All Sales and Services Activities funds will be designated with the applicable indirect cost rate of 29.8%. Assuming the department has properly accounted for the indirect cost rate when charging for Sales and Services, the overhead is collected at the point of sale. On a quarterly basis, the Budget Office will review the sales and services income and levy a charge to the appropriate expenditure account for the portion of the rate that recovers the overhead costs for the central campus, totaling 14.6%. The departmental portion of the rate, 15.2%, remains in the Sales & Service income account, to be distributed to the Dean, Director, or Principal Investigator's departmental account, depending on the policy of the School.
An annual report of activity will be required from Accounting for unrelated business income tax reporting purposes as indicated in A-61.
E. Fixed Price Contract Balances
Unexpended funds remaining on Private and Federal Fixed Price Contracts will be available to the Principal Investigator for 6 months after termination and completion of the contract obligations to enable all charges to be processed. During the 6 months, the indirect cost rate in effect during the contract period will continue to be assessed against all charges.
At the end of the 6 months, the unexpended balances will be assessed the indirect cost rate in effect during the contract period and will be transferred to a special sales and services fund which may be used by the Principal Investigator for other purposes.