Historically, the majority of service centers were found in fund 260. Since it is crucial for the Division of Financial Analysis to monitor whether Specialized Service Facilities follow Federal guidelines, existing SSFs will be migrated to the 261 fund and new SSFs will be setup initially in fund 261.
Department / Sub-Department
Service center operations should be identified no lower than the department / sub-department in the account structure. If needed, centers may have multiple sub-departments to track activity. All of the center’s capital assets should be found in PeopleSoft Asset Management under the same department / sub-department as the center’s operational account.
We recommend using the following guidelines when choosing which revenue institutional account to use, but please refer to the Accounting Code Manual under "4200-4999 Sales and Service Revenue" http://www.bo.uiowa.edu/~glaccman/index.cfm?action=glaccman.iacct&range=16&use=1 for further information:
- 4400 - Other Sales and Srvcs Intrdept: Use when charging intra or inter departmental (i.e. internal) customers, but NOT for Federally sponsored projects (Fund 510)
- 4401 - Other Sales and Srvcs Non Tax: Use when charging customers external to the University that are tax-exempt, including for agency account (Fund 950-989) customers
- 4403 - Sales Chrg Fed Grants-Interdpt: REQUIRED to use when charging internal customers for Federally sponsored project (Fund 510)
Subsidies occur when funds from another account are transferred into the center’s operating account or if center expenses are paid directly from an account outside the center’s operating account.
- Transfer – Funds are transferred into the center’s operational account via a 3570 / 7570 transaction. A transfer subsidy may be needed if:
- The center chooses not to charge a full rate for services provided.
- The center chooses to provide services to internal customers at a discount (for example: pilot activity, student use, etc). The center must keep a record of use supporting how many free or reduced units were allowed during a year. At year end, the normal charge rate should be applied to the units that were not fully charged (imputing revenue). A subsidy should be transferred into the center’s account to cover the amount unless an existing subsidy is already larger than the imputed revenue.
- Non capital expenditures paid outside of the center’s operating account. The following steps should be taken:
- Setup an account in the fund where the expenses will occur (or have occurred) using the same department / sub-department as the center.
- If the expense has already occurred, transfer the expense to the account with the matching department / sub-department combination of the center.
- Using this method, the expense remains in the original fund but can be identified as part of the service center.
- Example – An employee works 50% of her time in a center; however, 100% of her $50,000 salary is paid from the General Fund
|Fund||Dept||Sub-Dept||Original Expense||Final Expense|
|New Account Needed||050||1000||10000||$25,000|
*The new account can be identified as part of the center by the department / sub-department 1000 10000.
- Capital expenditures paid outside of the center’s plant fund are a subsidy if depreciation is not being recovered via the service center rate(s). If depreciation is not recovered, the subsidy is equal to the annual depreciation, not equal to the capital purchase in a particular year. Centers are not required to track depreciation subsidies.
Fund Balance (Break-even)
Service center rates should be set so the center breaks even. However, this requires very precise calculations of expected units, costs, and subsidies at the beginning of the fiscal year when rates are set. Because estimates may be inaccurate, it is probable that the center will have a surplus or deficit at the end of the year. Ideally, prior year surpluses or deficits should be included in the rate computation for the next year. However, up to a 10% (positive or negative) fund balance, as a percent of current year expenditures, will be considered acceptable by University standards. The Division of Financial Analysis will specifically review fund balances annually for SSFs and will work with those in excess of the threshold.
Plant Fund Reserve
The acquisition cost of capital assets cannot be directly expensed in the center. A separate capital asset “reserve account” should be established in fund 676 to account for capital transactions. The reserve account should contain the same department / subdepartment as the center. Setting up a reserve account is necessary if the center intends to recover depreciation expense in its billing rates. It is the preferred method for the center to build up a balance in order to purchase future capital assets. Please note the following:
- Transfers to the reserve account should be based on depreciation costs included in billing rates. Depreciation expense by department / subdepartment is available in PeopleSoft Asset Management.
- For SSFs, the Division of Financial Analysis will either record the transfers or review the transfers if they are recorded by SSF personnel.
- Assets purchased using Federal funds cannot be depreciated and included in billing rates.
- The reserve account is restricted to capital asset expenditures unless an exception is granted by the University Controller.
- The reserve account should not have a negative fund balance unless an exception is granted by the University Controller.
When a center is initially established, assets are often purchased using other funds (grants, gifts, departmental funds, etc.) or donated, since the center has not had the ability to build up a reserve account. Another option is the Equipment Purchase Plan established by the Business Office to assist departments when funds are not available. For questions regarding plan guidelines please contact Cathy Hagen at 335-0130.
Accounts Receivable Reconciliation
If a system outside of the University accounting system is used to invoice customers, it may be necessary to perform a reconciliation of the billing system to University records and true up any variances. This should be done on a monthly basis. Billings per the external billing system should match revenue in the General Ledger. Revenue in the General Ledger should not be cash basis.